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Exploring the nexus between oil price shocks and sectoral stock returns: a new evidence from stock exchange in Malaysia

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Abstract

This paper uses monthly data from 2000:05 to 2016:11 to investigate the relationship between oil price shocks and stock market returns of the nine economic sectors listed on Bursa Malaysia while incorporating oil price, interest rate, exchange rate, industrial production, and inflation into the regression. In order to avoid issue arising from the presence of the structural breaks, Narayan and Popp (J Appl Stat 37(9):1425–1438, 2010) unit root and autoregressive distributed lag (ARDL) with structural breaks were utilized. The ARDL bounds test results illustrate that all the sectors are cointegrated except trading/services and plantation sectors. The results further show that oil price has a significant negative impact on the property, mining, and technology sectors stock market returns.

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Acknowledgements

The authors gratefully acknowledge Multimedia University for the financial support. Moreover, we would like to thank the editor and the anonymous reviewers for their valuable comments.

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  1. Faculty of Business, Multimedia University, 75450, Melaka, Malaysia

    Ekhlas Al-hajj, Usama Al-Mulali & Sakiru Adebola Solarin

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  1. Ekhlas Al-hajj
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  2. Usama Al-Mulali
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  3. Sakiru Adebola Solarin
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Correspondence to Ekhlas Al-hajj.

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Al-hajj, E., Al-Mulali, U. & Solarin, S.A. Exploring the nexus between oil price shocks and sectoral stock returns: a new evidence from stock exchange in Malaysia. Econ Change Restruct 54, 199–217 (2021). https://doi.org/10.1007/s10644-020-09271-y

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