Bachelor Thesis from the year 2017 in the subject Economics - Finance, grade: 2, Asia Pacific University of Technology and Innovation, language: English, abstract: This research paper investigates the dynamic relationship between Kuala Lumpur Composite Index (KLCI) and four selected macroeconomic variables namely exchange rate, inflation rate, crude oil price and foreign direct investment. The research consists of 108 monthly observations from the period of January 2007 to December 2015.In this research, the Augmented Dickey-Fuller test (ADF) showed that at 5% significance level, all the variables are stationary at first difference. For the diagnostic tests, there is no multicollinearity, heteroscedasticity, autocorrelation, and model specification problems. However, normality problem was detected in the model. Moreover, Granger causality test and OLS regression model were carried out to determine the short-run and long-run relationships between the KLCI and the selected macroeconomic variables respectively. Results suggest that in the short-run there is no relationship between the KLCI and the four selected macroeconomic variables.However, in the long-run exchange rate, inflation rate, and crude oil prices are found to significantly affect the performance of KLCI, whereas foreign direct investment is found not to influence the movements of KLCI. The exchange rate and inflation negatively affect the KLCI, and the crude oil price has a positive impact in the KLCI movements.
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