The study is pursued with the objective to examine the effect of changes in crude oil price and three macroeconomic variables, namely exhange rate (RM/USD), overnight lending rate (OLR), and money supply (M1) on the performance of public listed companies in Bursa Malaysia as proxied by Kuala Lumpur Compsite Index (KLCI). The study employs Engle-Granger Cointegration test and Johansen-Juselius Multivariate Cointegration on the investigated variables. Using time series data from January 1983 through December 2006, the empirical findings show there exists a significant long-term relationship between KLCI performance and the four variables. The test results from Impulse Response Function and Variance Decomposition, however, fail to support the presence of a dynamic interaction between KLCI and the investigated variables. Interestingly, the test results form Granger Causality test indicate a significant role of money supply in influencing the performance of KLCI. The empirical findings from this study do have direct policy implications for regulators, international traders and investors.
