The impact of macroeconomic variables on Islamic stock market performance

Abstract

The aim of this study is to measure the effect of macroeconomic variables on the performance of the Malaysian Islamic stock market, by using Cointegration test and Error Correction Model (ECM). The results of this study show that there is a significant effect of these variables on the Islamic Index in the long run, and the existence of a long run equilibrium relationship. In addition, there are a long run causality relation. The Exchange Rate, Inflation, Budget Deficit and Government Debt (Interest Rate and M3) have negative (positive) effects on the Islamic Index.