The growth of the financial sector of an economy such as, the stock market is usually found to be highly correlated with the growth of the real sector of an economy. In this study, we make an attempt to investigate whether there is any significant relationship between the stock prices, macroeconomic variables and foreign stock prices in an economy. Using the Malaysian quarterly data from 1991–2010 and the time series techniques such as, cointegration, long run structural modeling, vector error correction, variance decompositions, impulse response functions, and persistence profile approaches, we evidence a significant statistical relationship existing between the Malaysian stock prices, exchange rate and foreign stock prices with the exchange rate being the most leading variable. We also found evidence of negative impact of the Asian Financial Crisis on Malaysian stock prices in the short run. The results appear to be plausible and contain strong policy implications.

This paper aims at investigating the time varying relationship between Islamic equity and commodity returns in order to examine how combination of Islamic equities and commodities contribute to the benefits of portfolio investors and managers. In order to investigate this relationship, we employed multivariate GARCH method on return series of five different commodity groups (energy, precious metals, agricultural, non-ferrous metals and softs group), Dow Jones spot commodity index as a proxy of an aggregate commodity market and Dow Jones Islamic index over the period January 3, 2001 - March 28, 2013. Our findings show that correlations between commodity and Islamic stock markets’ returns change in different time periods and these two markets moved very closely during 2008 financial crisis in particular. Besides, volatility of returns in both markets reached at their peaks during the 2008 crisis period. We also show that despite sharing some common features, commodities cannot be considered as a homogeneous asset class: a speculation phenomenon is for instance, highlighted for energy sector comprising oil, while the safe-haven role of gold is evidenced, which constitutes a part of precious metal sector.