Stock market and aggregate consumption asymmetry: evidence from Malaysia
Purpose – The purpose of this paper is to analyze the influences of real share prices on aggregate consumption for Malaysia with the focus on whether there is asymmetry in the long-run relation of the two variables. Design/methodology/approach – The paper specifies aggregate consumption to depend on...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Emerald Group Publishing
2010
|
| Online Access: | http://psasir.upm.edu.my/id/eprint/16847/ http://psasir.upm.edu.my/id/eprint/16847/1/16847.pdf |
| _version_ | 1848843076220485632 |
|---|---|
| author | Ibrahim, Mansor Habibullah, Muzafar Shah |
| author_facet | Ibrahim, Mansor Habibullah, Muzafar Shah |
| author_sort | Ibrahim, Mansor |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | Purpose – The purpose of this paper is to analyze the influences of real share prices on aggregate consumption for Malaysia with the focus on whether there is asymmetry in the long-run relation of the two variables. Design/methodology/approach – The paper specifies aggregate consumption to depend on real income and real share prices. Alternatively, imposing long-run budget constraint, the paper specifies the relation between aggregate consumption and real share prices as ratio to real income. Then, it applies an asymmetric cointegration and error correction modeling. Findings – The cointegration tests indicate the presence of a long-run relation between consumption-income ratio and share price-income ratio. More interestingly, while changes in share prices exert short-run causal influences on Malaysia’s private consumption, evidence is found for the adjustments of consumption – income ratio to the long-run equilibrium path only when it is above its long-run value. The paper interprets the finding as suggesting downward revisions in the consumption patterns when there are adverse shocks in share prices and accordingly, supports the existence of especially negative wealth effect for Malaysia. Research limitations/implications – Owing to data limitations, the paper relies on aggregate consumption and aggregate income data. It acknowledges that the sum of non-durable consumption and flow-of-services from durable purchases and labor income are more appropriate measures of, respectively, consumption and real income. Originality/value – The findings have important implications for understanding consumption behavior in a developing country and can provide insight on the effectiveness of monetary policy. |
| first_indexed | 2025-11-15T08:09:16Z |
| format | Article |
| id | upm-16847 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T08:09:16Z |
| publishDate | 2010 |
| publisher | Emerald Group Publishing |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-168472019-10-18T04:08:53Z http://psasir.upm.edu.my/id/eprint/16847/ Stock market and aggregate consumption asymmetry: evidence from Malaysia Ibrahim, Mansor Habibullah, Muzafar Shah Purpose – The purpose of this paper is to analyze the influences of real share prices on aggregate consumption for Malaysia with the focus on whether there is asymmetry in the long-run relation of the two variables. Design/methodology/approach – The paper specifies aggregate consumption to depend on real income and real share prices. Alternatively, imposing long-run budget constraint, the paper specifies the relation between aggregate consumption and real share prices as ratio to real income. Then, it applies an asymmetric cointegration and error correction modeling. Findings – The cointegration tests indicate the presence of a long-run relation between consumption-income ratio and share price-income ratio. More interestingly, while changes in share prices exert short-run causal influences on Malaysia’s private consumption, evidence is found for the adjustments of consumption – income ratio to the long-run equilibrium path only when it is above its long-run value. The paper interprets the finding as suggesting downward revisions in the consumption patterns when there are adverse shocks in share prices and accordingly, supports the existence of especially negative wealth effect for Malaysia. Research limitations/implications – Owing to data limitations, the paper relies on aggregate consumption and aggregate income data. It acknowledges that the sum of non-durable consumption and flow-of-services from durable purchases and labor income are more appropriate measures of, respectively, consumption and real income. Originality/value – The findings have important implications for understanding consumption behavior in a developing country and can provide insight on the effectiveness of monetary policy. Emerald Group Publishing 2010 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/16847/1/16847.pdf Ibrahim, Mansor and Habibullah, Muzafar Shah (2010) Stock market and aggregate consumption asymmetry: evidence from Malaysia. Studies in Economics and Finance, 27 (1). pp. 19-29. ISSN 1086-7376; ESSN: 1755-6791 10.1108/10867371011022957 |
| spellingShingle | Ibrahim, Mansor Habibullah, Muzafar Shah Stock market and aggregate consumption asymmetry: evidence from Malaysia |
| title | Stock market and aggregate consumption asymmetry: evidence from Malaysia |
| title_full | Stock market and aggregate consumption asymmetry: evidence from Malaysia |
| title_fullStr | Stock market and aggregate consumption asymmetry: evidence from Malaysia |
| title_full_unstemmed | Stock market and aggregate consumption asymmetry: evidence from Malaysia |
| title_short | Stock market and aggregate consumption asymmetry: evidence from Malaysia |
| title_sort | stock market and aggregate consumption asymmetry: evidence from malaysia |
| url | http://psasir.upm.edu.my/id/eprint/16847/ http://psasir.upm.edu.my/id/eprint/16847/ http://psasir.upm.edu.my/id/eprint/16847/1/16847.pdf |