The Response of Sectoral Returns to Macroeconomic Shocks in the Malaysian Stock Market

  • Siong Hook Law Universiti Putra Malaysia
  • Mansor H Ibrahim International Center for Education in Islamic Finance

Abstract

This paper examines the responses of sectoral returns to shocks in five macroeconomic indicators using the vector autoregressive (VAR) model and generalised impulse response functions for an emerging stock market, Malaysia. The empirical results suggest that, while the temporal responses of sectoral returns to macroeconomic shocks are relatively identical, their initial responses are slightly different. Monetary policy and exchange rate shocks have the largest effect on the finance sector, whereas output and exchange rate shocks exert most influence on the property sector. Comparatively, among the shocks, monetary shocks (i.e., money supply, interest rate and exchange rate shocks) are more influential in influencing sectoral returns than goods market shocks (i.e., output and consumer price shocks).

Author Biography

Siong Hook Law, Universiti Putra Malaysia

Faculty of Economics and Management, Universiti Putra Malaysia

Published
2017-06-02
How to Cite
LAW, Siong Hook; IBRAHIM, Mansor H. The Response of Sectoral Returns to Macroeconomic Shocks in the Malaysian Stock Market. Malaysian Journal of Economic Studies, [S.l.], v. 51, n. 2, p. 183-199, june 2017. ISSN 1511-4554. Available at: <https://mjes.um.edu.my/index.php/MJES/article/view/2826>. Date accessed: 11 dec. 2017.
Section
Articles