The Relationship between the Money Market Rates and the Common Stock Returns: The Malaysian Experience

Noor Azlan Ghazali

Abstract


The relationship between monetary developments and common stock returns has been the focus of a considerable amount of research in recent years. This paper addresses the relationship between the money market rates and the common stock returns in Malaysia. Statistical analyses were conducted to provide empirical linkage between the two market; i.e., money market and capital market. The results indicated that no significant relationship exist between money market rates movement and common stock returns. However, the inverse relationship between the two variables was traced in the Malaysian market. Among all money market rates, the interbank rates offer some predictive power as it is commonly used as liquidity barometer in the Malaysian inancial market. This study also found evidence of disintermediation, i.e., outlow offud from the banking sector into direct capital market due to changing level of interest rate. 

ABSTRAK

Hubungan antara perubahan monetari dan pulangan saham biasa telah menjadi fokus bagi sejumlah besar kajian sejak kebelakangan ini. Kajian ini mengutarakan hubungan antara kadarfaedah pasaran wang dan pulangan bagi saham biasa di Malaysia. Analisis statistik telah dijalankan bagi melihat hubungan empirik di antara kedua-dua pasaran iaitu pasaran wang dan pasaran modal. Keputusan menunjukkan bahawa tiada hubungan yang signifikan wujud antara pergerakan kadar faedah pasaran wang dan pulangan saham biasa. Walau bagaimanapun hubungan songsang yang jelas telah dikesan di dalam pasaran Malaysia. Antara kesemua kadar faedah pasaran wang, kadar antara bank telah menunjukkan kuasa jangkaan yang minor.Ini adalahjelas kerana kadar antara bank sering digunakan sebagai penunjuk kecairan di dalam pasaran kewangan Malaysia. Kajian inijuga menemuibuktipenyahantaraan, iaitu, aliran keluar dana daripada sektorperbankan kepada pasaran modal terus akibat perubahan kadar faedah. 


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