Stock price fluctuations may rise and fall according to the financial market history. Normally, when they have good news the stock price will increase. In contrast, when they have bad news, the stock price will automatically fall. The stock price might increase or decrease that effected by the news come from the market, economy or the activity of the company. All the information that provided for this particular study is to verify which variables to be selected on the past literature. The result may be influence by the period of study, country of study, technique and the stock price behavior. (NORHAFIZA NORDIN, 2014) who are found to study the impact of commodity prices in influencing the behavior of the stock market index specifically by focusing on the palm oil prices. Malaysia is one of the major producers of palm oil. Malaysia’ stock market index will be influence by the behavior of the price of palm oil. To obtaining the objective, it have used the bounds test approach to analyze the existence of cointegration relationship among the underlying variables of the Malaysian stock market index, interest rate, exchange rate and the price of palm oil. They are using monthly data for the period of 1997M12 to 2012M9, in the long run and short run results of an ARDL test indicates that all the variables employed are significant in affecting the Malaysian stock market index. In analyzing the long run and short run relationship between macroeconomics variables and the Malaysian stock market index, (Mugableh, 2015) determine that there is a cointegration relationship between macroeconomic variables of GDP, producer price index, CPI, M3 and exchange rate with the Malaysian stock market index for the period of 1977 to 2011. For the long run result, GDP is found to have a positive relationship with the stock market index while the PPI, CPI, exchange rate and M3 are found to have negative relationships with the stock market index. For the short run results, only GDP is found to apply a significant positive impact on the stock market index.
(THANG, 2009)who is found to examine the exchange rate and interest rate on the Malaysia stock market index. There are three variables in study are stationary at first difference, that applied to search for the long run and short run impacts which is I(1) variables. Johansen Juselius (JJ) cointegration test, Vector Error Correction Model (VECM) and Granger Causality. The test results correspond to a priori expectations. In the long run and short run, the interest rate and the exchange rate have negative impact on the stock market index. The results present some useful insights into the effects of interest rate and exchange rate on the stock market index in Malaysia. According to the portfolio approach, the interest rate and the exchange rate have negative impact on the stock market index. (Shrestha, 2008) examine some macro-economic variables and stock market indices in China between the long term relationships. This study shows that industrial production and money supply are positively related to the stock market indices. Conversely, interest rate and exchange rate have negative impact on the stock market indices in China same as Malaysia.
(Sheikh, 2013)who is found to identify the relationship of stock indexes on interbank money market rates that to investigation the numerous variables that might be able to influence economic system. It make used of a secondary data by based upon the top ten largest stock exchanges in the world and BIBOR from 2006 to 2011. The other market face fluctuates should be face that affect too which in accordance with the efficient market hypothesis (EMH). As the theory of the efficient market (Fama, 1969) that mentioned ‘anytime the information can be effect to the prices and fully reflect available information in the market’. As, (Mishkin, 2004)noted more detail definition that is ‘all prices are always correct and reflect market fundamental’. Additionally, the efficient market hypothesis, it can classify into three types which are weak-form, semi strong-form, and strong-form. News, information, and economic variables in the market following the efficient market hypothesis must be affecting the interbank rates adjustment.
According to the (M. Shabri Abd. Majid & M. Shabri Abd. Majid, 2009) examine the relationship that exists between the development of Islamic stock market and macroeconomic variables in Malaysia. By employing the Vector Auto Regression (VAR) method, they discover that the Islamic stock prices are cointegrated with the underlying variables of industrial production index, consumer price index, money supply, Islamic interbank rate and exchange rate. IPI and CPI show that significant positive relationship with the Kuala Lumpur Syariah Index, while M3 and exchange rate have a significant negative relationship with the Islamic index. There is no significant relationship found between the Islamic index and the Islamic inter-bank rate.
(Paul Alagidede, 2010)have explored the long run and short run relationship between the stock prices and exchange rates. They examine the short run and long run relationship the said variables by using cointegration, vector error correction modeling technique and standard Granger causality. According to the results of all the countries (India, Sri Lanka, Pakistan and Bangladesh) they have study, they did not found any short-run relationship between the stock prices and exchange rates. There is no long-run relationship between stock prices and exchange rates for Pakistan and India as well but for Bangladesh and Sri Lanka there feel as though a bi-directional causality between the stock price and exchange rates.
(Buerhan Saiti, 2014) examined the relationship between exchange rate, palm oil price and Kuala Lumpur Composite Index (KLCI). They have found the exchange rate leads the stock price bases on the negative significant correlations in the wavelet cross-correlations between exchange rate and stock price. The stock price leads commodity price in the long run according to there is no significant wavelet-cross-correlation at the first four levels in the case of stock and commodity prices but at level 5 the wavelet-cross-correlation have skewed to the left. The result show there is no lead-lag relationship between commodity price and exchange rate bases on there is no significant wavelet cross-correlations at all levels.
(Amarasinghe, 2015) examines the relationship of stock price and interest rate. All Share Price Index (ASPI) data and the interest rate was stationary at first difference, they obtain by employed Augmented Dickey Fuller test to find out the stationary of the data series. The Granger Causality test was used to check any causal relationship between stock returns and interest rate the results show that, there is one way causal relationship between variables. In the last, they employ regression to check the outcome of Granger Causality Test. The result of the regression shows that interest rate is a significant factor for stock return changes and interest rate has significant negative relationship with ASPI.