The Long-run Relationship between Islamic Stock Market and Macroeconomic Variables

Abstract

This study examined the long-run relationship between Islamic stock market and macroeconomic variables in Malaysia. The augmented Dickey-Fuller (ADF) tests and autoregressive distributed lag (ARDL) were employed to analyse the stationary of data collected and determine the long-run relationship in the research model. The monthly data from January 2008 to September 2015 were collected from Datastream. The results revealed that there was a significant relationship for the long-run relationship between Islamic stock market and macroeconomic variables namely inflation and interest rate. The findings concluded that macroeconomic variables had a greater effect and they were inversely related to Islamic stock market. These findings may suggest policies that are controlled by macroeconomic variables such as inflation and interest rate in enhancing the Islamic stock market in Malaysia.