Macroeconomics, Investor Sentiment, and Islamic Stock Price Index in Malaysia

Journal of Economic Cooperation and Development, 35, 4 (2014), 219-234

16 Pages Posted: 1 Nov 2018

See all articles by Mamunur Rashid

Mamunur Rashid

University of Brunei Darussalam - UBD School of Business and Economics; Nottingham University Business School Malaysia Campus

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Ng Yuen Yein

Nottingham University Business School

Date Written: 2014

Abstract

Asset prices are strongly connected to macroeconomic variables even in the presence of investor sentiment. On the other hand, if investor sentiment is a significant determinant in Islamic stock market, it will raise critiques on the need of Shariah compliant markets. Consequently, newer studies should investigate the need of separate capital markets for Muslims. This study examines the level of exposure of conventional and Islamic stock price indices in Malaysia to the relative change in investor sentiment index and macroeconomic factors. The study tested two separate models: one using macroeconomic variables in quarterly time series framework and the other using macroeconomic and sentiment data in a quarterly time series framework. This study reports that interest rates, currency index and FTSE Bursa Malaysia Composite Index pose greater influence on Islamic price index when compared to industrial production, consumer price index, money supply and investor sentiment indices. The results continue an important battery of debates on the requirement of shari’ah compliant capital market for Muslims. The study unlocks room for new studies on influence of sentiment in Islamic financial industry.

Keywords: Asset prices, Macroeconomic Variables, Investor Sentiment, Islamic stock market

Suggested Citation

Rashid, Mamunur and Hassan, M. Kabir and Yein, Ng Yuen, Macroeconomics, Investor Sentiment, and Islamic Stock Price Index in Malaysia (2014). Journal of Economic Cooperation and Development, 35, 4 (2014), 219-234 , Available at SSRN: https://ssrn.com/abstract=3263270

Mamunur Rashid

University of Brunei Darussalam - UBD School of Business and Economics ( email )

Jalan Tungku Link
Gadong
Bandar Seri Begawan, BE1410
Brunei

Nottingham University Business School Malaysia Campus ( email )

Jalan Broga
Semenyih, Selangor 43500
Malaysia

HOME PAGE: http://www.nottingham.edu.my/Business/People/Mamunur.Rashid

M. Kabir Hassan (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Ng Yuen Yein

Nottingham University Business School

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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