This study empirically explores the dynamic interaction between Islamic stock prices and some selected macroeconomic variables in the Malaysian economy. It also attempts to investigate the interactions between the Islamic stock and Islamic bank financing in the country. A monthly data from the period 1999 to 2013 were analysed using the standardised time series techniques, including the cointegration, Granger causality, and impulse response function. The study found that there was a long-run relationship among the variables. Meanwhile, in the short-run, the study found that the development of economy and Islamic banking industry have contributed to the growth of Islamic stock prices, and vice versa. This implies that the developments of Islamic stocks, Islamic banking industry, and national economy would promote and strengthen the Malaysian position as a viable international hub for the Islamic finance industries in the globe.
ISSN 0116-7111 (Print)
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