THE IMPACT OF OIL PRICE SHOCKS ON ISLAMIC FINANCIAL MARKET IN MALAYSIA

Mohd Yahya Mohd Hussin; Fidlizan Muhammad; Kamaruzaman Noordin; Nur Fakhzan Marwan; Azila Abdul Razak

doi:10.51200/ljms.v6i.2965

Authors

Mohd Yahya Mohd Hussin Faculty of Management and Economics, Universiti Pendidikan Sultan Idris
Fidlizan Muhammad Faculty of Management and Economics, Universiti Pendidikan Sultan Idris
Kamaruzaman Noordin Academy of Islamic Studies, Universiti Malaya
Nur Fakhzan Marwan Faculty of Business Management, Universiti Teknologi MARA
Azila Abdul Razak Faculty of Management and Economics, Universiti Pendidikan Sultan Idris

DOI:

https://doi.org/10.51200/ljms.v6i.2965

Keywords:

Oil Price, Islamic Stock Market, Macroeconomic Variables, Cointegration

Abstract

This research will focus on the impact of oil price shocks and macroeconomic variables on Islamic stock market in Malaysia. The objective of this research is to evaluate the relationship between oil price, macroeconomic indicators and Islamic stock market in Malaysia using an estimation of Vector Auto Regression (VAR) method. The variables involved in this research are Crude Oil Price (COP), Industrial Production Index (IPI), Consumer Production Index (CPI), Aggregate Money Supply (M3), Islamic Interbank Rate (IIR), Exchange Rate of Malaysian Ringgit-United States Dollar (MYR) and FTSE Bursa Malaysia Emas Shariah Index (FBMES). This research used monthly data from January 2007 to December 2011 taken from authorized sources. The findings showed that Islamic stock prices are co-integrated with oil price and selected macroeconomic variables. Based on cointegration relationship analysis, the Islamic stock price is related positively and significantly with IPI, CPI and COP variables but related inversely and significantly with M3, IIR and MYR variables. From the Granger causality view, only inflation variable Granger cause for Islamic stock return in Malaysia.