UNIVERSITI TEKNOLOG1 MARA
A STUDY ON HOW FOREIGN EXCHANGE (FOREX) MARKET, WORLD OIL PRICE AND STOCK MARKET INDEX INFLUENCE THE STABILITY OF MALAYSIA’S
ECONOMIC GROWTHS
WAN NOR IZURA B T WAN ISMAIL 2004337731
BBA (HONS) FINANCE FACULTY OF BUSINESS MANAGEMENT
UNIVERSITI TEKNOLOGI MARA KELANTAN
NOVEMBER 2006
50 T ah u n UiTM
1 9 5 6 - 2 0 0 6
C S 3 TEK NC MARA UN IVER S ITI TEK NOLOG 1
K ecem erlan g an B erterusan
BACHELOR OF BUSINESS ADMINISTRATION (HONS) FACULTY OF BUSINESS MANAGEMENT
DECLARATION OF ORIGINAL WORK
I am WAN NOR IZURA BT WAN ISMAIL I/C Number: 830908-03-5354 Hereby, declare that:
1. This work has not previously been accepted in substance for any degree, locally or overseas, and is not being concurrently submitted for this degree or any other degrees.
2. This paper is the result of the independent investigation of the analyst, except where otherwise stated.
3. All verbatim have been distinguished by quotation marks and sources of information have specifically acknowledged.
Signature: ^ — Date: 30 October 2006
T A B L E O F C O N T E N T
D E C L A R A T IO N ii
L E T T E R O F S U B M IS S IO N iii
A K N O W L E D G E M E N T iv
T A B L E O F C O N T E N T S vi
L IS T O F T A B L E ix
L IS T O F F IG U R E S x
A B B R E V IA T IO N xi
A B S T R A C T xii
CHAPTER 1: INTRODUCTION
1.1 Background of Study
1.1.1 Overview of economic growth in Malaysia 1 1.1.1.1 Obstacle in maintaining the stability of 3
economic growths
1.1.2 Overview of FO REX market 6
1.1.3 Overview of stock market index 7
1.1.4 Overview of world oil price 9
1.2 Problem Statement 11
1.3 Objectives of study 14
1.4 Scope of study 15
CONTENTS PAGE
1.5 Theoretical Framework 16
1.6 Hypothesis 17
1.7 Significance of Study 19
1.8 Limitation of Study 21
1.9 Definition of Term 23
CHAPTER 2: LITERATURE REVIEW
2.1 Stock Market Index and Economic Growth 26 2.2 World Oil Price and Economic Growth 28
2.3 F O R E X and Economic Growth 30
CHAPTER 3: RESEARCH M ETHODOLGY
3.1 Data Collection Method 35
3.2 Method for Analysis Data 36
CHAPTER 4: FINDING AND ANALYSIS
4.1 Chapter Description 47
4.2 Interpretation of Result 47
Simple Linear Regression Model
4.3 Interpretation of Result 69
Multiple Linear Regression Model
v i i
A B S TR A C T
T h e fo cus of the s tu d y is to m e a s u re the relationship b e tw e e n ind e p en d en t v aria b le s ( F O R E X m arket, w o rld oil price, stock m ark et ind e x) a nd d ep e n d e n t varia b le (e c o n o m ic g ro w th s ). T h is s tu d y is b a s e d on s e c o n d a ry data that has b ee n co llected from B u rs a M a la ysia, B a n k N e g a ra M a la ys ia (B N M ), D e p a rtm e n t of Statistic a n d O P E C in qua rte rly basis, ra n gin g from the y e a r 1991 to 2 0 0 5 in o rd e r to se e the trend within the period. S in c e the s tu dy a im s to d eterm ine the relationship b e tw e e n th o se ind e p e n d e n t va ria b le s with the e c o n o m ic grow th, the re s e a rc h e r h a s u sed 3 m eth o d s o f re g ressio n w h ich are S im p le L in e a r R e g re s s io n M o d e l, M ultiple Line a r R e g re s s io n M o de l and P e a rs o n C oefficient C o rrelatio n. T -S ta tis tic is a co rre ct a n d reliable test to m e a s u re the c lo s e relationship betw ee n d e p e n d e n t a nd in d e p e n d e n t varia b le s. T h u s , from S im p le Line a r R e g re s s io n , b y u sing the t-test indicates that U S Dollar, S in g a p o re D o lla r and K L C I invo lved in this s tu d y h a ve no relationship with e co n o m ic g row ths. H o w e v e r, u sing M ultiple R e g re s s io n M o de l, b y u sin g t-test, K L C I a nd w o rld oil price h a s significant relationship with e co n o m ic g row ths. M e a n w h ile b y u sin g P e a rs o n C orrelatio n C oefficient, all ind e p e n d e n t va ria b le s h a ve strong positive correlation with e co n o m ic g ro w th s e x ce p t K L C I w h ich ha s a w e a k positive correlation. T h u s , from the result w e ca n co n c lu d e that the w o rld oil price is the m o s t significant factor in influencing o u r e c o n o m ic g row ths.
