Investigating the effect of price of rubber fluctuations on stock prices and exchange rates in Malaysia

Document Type

Article

Publication Date

1-1-2021

Abstract

This paper examines the relationship between the stock price and nominal exchange rate in Malaysia to ascertain the significance of using rubber price as a correction mechanism. The Johansen cointegration test was employed to investigate the effects of linear combination and the relationships among the components in a multiple time series. A two-regime, intercept-adjusted Markov switching vector error correction model was also used to examine the parameters concerned. Rubber price is used as a correction mechanism. Because rubber is one of Malaysia’s main exports, using rubber price as a correction mechanism may affect the country’s economy. The results of this study show that the said variables have cointegrating relations. Further, the nominal exchange rate has a negative relationship with the changes in stock price. Markov switching vector error correction model was found to be suitable for examining the data as the findings had a small variance. © 2021 by De La Salle University.

Keywords

Cointegration, Exchange rate, Markovswitching, Rubber price, Stock price

Publication Title

DLSU Business and Economics Review

Divisions

Faculty_of_Business_and_Accountancy

Funders

Ministry of Education of Malaysia,FRGS/1/2019/ STG06/UM/02/9

Volume

31

Issue

1

Publisher

De la Salle University

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