Banking liquidity and stock market prices in three countries in Asean

Tin-fah Chung; M. Ariff; Shamsher M

Please use this identifier to cite or link to this item: https://ptsldigital.ukm.my/jspui/handle/123456789/578590

Title:	Banking liquidity and stock market prices in three countries in Asean
Authors:	Tin-fah Chung M. Ariff Shamsher M
Keywords:	ASEAN countries Liquidity bubble Pooled mean group Dynamic Fixed Effects Cointegration Structural break Panel Unit Roots
Issue Date:	Mar-2017
Description:	This paper reports evidence of a banking liquidity impact on stock prices in the three Asean countries. Banking liquidity impacts suggested by Friedman is yet to be fully investigated nor verified despite several attempts. If improved liquidity of banks leads to credit expansion, which in turn leads to more positive net present value projects undertaken by firms, earnings of the latter must go up, and hence the share prices should rise. This link is worth an investigation. According to an influential of the US stock market, up to 52% of share returns are due to changes in the macro economy. Using a 3-equation structural model as well as employing corrections for cross-section dependence, we examine the link between money supply, liquidity and stock prices over 2001:4Q and 2012:2Q in three developing countries. It is found money supply changes lead to a positive liquidity effect and banking liquidity impacts share market prices positively. These findings are new and in support of Friedman’s liquidity proposition, and also constitute evidence of a banking liquidity having a positive effect on asset prices.
News Source:	Pertanika Journal of Social Sciences & Humanities
ISSN:	0128-7702
Volume:	25
Pages:	291-316-
Publisher:	Universiti Putra Malaysia Press
Appears in Collections:	Journal Content Pages/ Kandungan Halaman Jurnal

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