Stock Market and Aggregate Investment Behavior in Malaysia: An Empirical Analysis

Mansor Ibrahim, Abdullahi Ahmed

    Research output: Contribution to journalArticle

    1 Citation (Scopus)

    Abstract

    The present paper analyzes the role of stock market, more specifically real stock prices and stock market uncertainty/volatility, on aggregate investment behavior for an emerging market, Malaysia. Employing the autoregressive distributed lags approach to cointegration test, the paper establishes a long run equilibrium that ties the aggregate investment to its determinants-real income, real stock prices, real lending rate and stock market volatility. In the long run, we document a positive relation between aggregate investment and real stock prices and a negative relation between aggregate investment and stock market volatility. These results are further supported by our analyses of their dynamic interactions based on Granger causality and impulse-response functions. Based on the results, the real stock market prices, which has yet reached the level recorded prior to the crisis, may have explained the low investment in Malaysia after the Asian crisis. Moreover, the stock market volatility can also post a threat to the investment performance.

    Original languageEnglish
    Pages (from-to)265-284
    Number of pages20
    JournalTransition Studies Review
    Volume20
    Issue number2
    DOIs
    Publication statusPublished - Oct 2013

    Keywords

    • Aggregate investment
    • Conditional and realized volatility
    • Malaysia
    • Stock prices

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