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Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.]

This research uses an error correction model to explore the asymmetric effects of five different exchange rates on the Kuala Lumpur Composite Index (KLCI) during the period of currency crisis. Order of integration was checked using Augmented Dickey Fuller and Phillip-Perons tests for unit root. The...

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Main Authors: Hj. Wahhab, Anuar, Ab Rahman, Nik Muhd Naziman
Format: Research Reports
Language:English
Published: Research Management Institude 2002
Subjects:
Business cycles. Economic fluctuations. Economic indicators
Dividends. Stock dividends. Dividend reinvestment
Online Access:http://ir.uitm.edu.my/id/eprint/25211/1/LP_ANUAR%20HJ.%20WAHHAB%20RMI%20K%2002_5.pdf
http://ir.uitm.edu.my/id/eprint/25211/
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spelling my.uitm.ir.252112019-09-11T04:38:39Z http://ir.uitm.edu.my/id/eprint/25211/ Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.] Hj. Wahhab, Anuar Ab Rahman, Nik Muhd Naziman Business cycles. Economic fluctuations. Economic indicators Dividends. Stock dividends. Dividend reinvestment This research uses an error correction model to explore the asymmetric effects of five different exchange rates on the Kuala Lumpur Composite Index (KLCI) during the period of currency crisis. Order of integration was checked using Augmented Dickey Fuller and Phillip-Perons tests for unit root. The Johansen approach was used to test cointegration in multivariate system involved long run and short run estimations. The empirical evidence obtained from this study shows there exist a significant long run and short run relationship between the exchange rates variability and stock price behavior of the KLCI. Based on the asymmetric effects of the exchange rates and KLCI, we posit that the Malaysian Ringgit vis-a-vis Deutschmark and US Dollar had more exposure on the Fnancial Theory of Arbitrage i.e. the depreciation of the Ringgit will lead to the downfall of the KLCI. Nevertheless, the study found contrary evidence of the Malaysian Ringgit vis-a- vis Japanese Yen, Great Britain Pound and Singapore Dollar which follows the Macroeconomic Theory of Trade Channel i.e. the depreciation of the Ringgit will increase the performance of the KLCI. Finally, the overall findings suggest the fragility of the existing flexible exchange rate regime and the risk associated with such environment. Therefore, this research supports the call by the Prime Minister for a “New Global Financial Architecture”. Research Management Institude 2002-11 Research Reports NonPeerReviewed text en http://ir.uitm.edu.my/id/eprint/25211/1/LP_ANUAR%20HJ.%20WAHHAB%20RMI%20K%2002_5.pdf Hj. Wahhab, Anuar and Ab Rahman, Nik Muhd Naziman (2002) Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.]. [Research Reports] (Unpublished)
institution Universiti Teknologi Mara
building Tun Abdul Razak Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Teknologi Mara
content_source UiTM Institutional Repository
url_provider http://ir.uitm.edu.my/
language English
topic Business cycles. Economic fluctuations. Economic indicators
Dividends. Stock dividends. Dividend reinvestment
spellingShingle Business cycles. Economic fluctuations. Economic indicators
Dividends. Stock dividends. Dividend reinvestment
Hj. Wahhab, Anuar
Ab Rahman, Nik Muhd Naziman
Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.]
description This research uses an error correction model to explore the asymmetric effects of five different exchange rates on the Kuala Lumpur Composite Index (KLCI) during the period of currency crisis. Order of integration was checked using Augmented Dickey Fuller and Phillip-Perons tests for unit root. The Johansen approach was used to test cointegration in multivariate system involved long run and short run estimations. The empirical evidence obtained from this study shows there exist a significant long run and short run relationship between the exchange rates variability and stock price behavior of the KLCI. Based on the asymmetric effects of the exchange rates and KLCI, we posit that the Malaysian Ringgit vis-a-vis Deutschmark and US Dollar had more exposure on the Fnancial Theory of Arbitrage i.e. the depreciation of the Ringgit will lead to the downfall of the KLCI. Nevertheless, the study found contrary evidence of the Malaysian Ringgit vis-a- vis Japanese Yen, Great Britain Pound and Singapore Dollar which follows the Macroeconomic Theory of Trade Channel i.e. the depreciation of the Ringgit will increase the performance of the KLCI. Finally, the overall findings suggest the fragility of the existing flexible exchange rate regime and the risk associated with such environment. Therefore, this research supports the call by the Prime Minister for a “New Global Financial Architecture”.
format Research Reports
author Hj. Wahhab, Anuar
Ab Rahman, Nik Muhd Naziman
author_facet Hj. Wahhab, Anuar
Ab Rahman, Nik Muhd Naziman
author_sort Hj. Wahhab, Anuar
title Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.]
title_short Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.]
title_full Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.]
title_fullStr Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.]
title_full_unstemmed Currency crisis and stock price behaviour : Evidence from the Kuala Lumpur composite index / Anuar Hj. Wahhab…[et al.]
title_sort currency crisis and stock price behaviour : evidence from the kuala lumpur composite index / anuar hj. wahhab…[et al.]
publisher Research Management Institude
publishDate 2002
url http://ir.uitm.edu.my/id/eprint/25211/1/LP_ANUAR%20HJ.%20WAHHAB%20RMI%20K%2002_5.pdf
http://ir.uitm.edu.my/id/eprint/25211/
_version_ 1685649968275128320
score 13.211869

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