Research methodology can be said as the base or guideline that will ease the researchers or the readers in the data collection method and analysis. On the other hand, it can also be defined as the description of technique used to achieve the objectives of the study and it is considered as an important chapter in the research. In this chapter, it will focused more towards the methodology that will be used for the research purpose. It consists of eight basic elements which are data collection, source of data, variables, research design, research framework, data analysis, hypotheses statement and conclusion. The data for this study was gained from the secondary data in the Data Stream, take into account are KLSE (Index) as dependent variables while Base Lending Rate (%), Consumer Price Index (Index), Industrial Production (Index), M2 Money Supply (MYR Mil), Export (MYR Mil), Import (MYR Mil) and Exchange Rate (MYR - US $) as independent variables.
3.1 DATA COLLECTION
In this study, all the data used in this study was collected from the secondary data. Secondary data was gathered and recorded by the prior researchers' which it is used for the purpose of the research related to their interest. The secondary data usually is historical in nature and it is already been assembled which it is really a time and cost saver. A quarterly time series data was collected from the range of first quarter of 2000 to last quarter of 2011. The brief concept, class and indicator for both dependent and independent variables used are presented in the Table 1 below.
Table 1: Concept, class and indicator of data
Variables
Concept
Class
Indicator
Source
KLCI
KLSE
Equity Market Related
Index
Data Stream
BLR
Interest Rate
Interest Rate
Percentage (%)
Data Stream
CPI
Inflation Rate
Consumer Retail/Prices
Index
Data Stream
IP
Industrial Production
Industrial Production Indices
Index
Data Stream
M2
Money Supply
Money Supply
MYR Mil
Data Stream
Export
Export
External Trade
MYR Mil
Data Stream
Import
Import
External Trade
MYR Mil
Data Stream
EXR (MYR - US $)
Exchange Rate
Exchange Rate
MYR
Data Stream
3.2 SOURCE OF DATA
Mentioned earlier in this chapter, the data gathered for the purpose of this study was from the Data Stream. At first, annual data from the interval of 1987-2011 was collected. However, to make sure the data collected to be accurate and precise; the data which is unavailable have to be eliminated. Thus, this result the data to be collected based on the quarter time series data. The sources of the data are as follows:
3.2.1 Data Stream
Data Stream is one of the facilities that had been provided by the university in order to make data collection much easier. The usage of the data stream is considered useful provided that the researchers solely use secondary data to perform the research. Data Stream also offered a wide variety of data including KLSE, Base Lending Rate, Consumer Production Index, Industrial Production, M2 Money Supply, Export, Import and Exchange Rate.
3.2.2 Website
As widely known that website can provide a bulk amount of data. The usage of website makes the research to be done in much easier way. It covers all scope of information to be use for the supporting purpose of this research. Since, website offer an enormous amount of information, researchers must know which information is reliable to be use.
3.2.3 Journals
In this paper, journals have been used in order to increase the level of knowledge of the researchers. It is very handful for the purpose of writing the literature review in chapter 2. The journal used was collected from various sources such as Journal of Financial Economics, Journal of Risk Finance, Journal of Finance & Accounting and Journal of Economics and Sustainable Development.
3.2.4 Textbooks
Textbooks were used to understand in more details of the specific terms and further information that had been or will be used in this study.
3.3 VARIABLES
3.3.1 Dependent Variable
The dependent variable used in this paper is Kuala Lumpur Stock Exchange (KLSE).
3.3.2 Independent Variable
The independent variables used in this paper are KLSE, Base Lending Rate, Consumer Price Index, Industrial Production, M2 Money Supply, Export, Import and Exchange Rate.
Both variables were used in the study as to put forth the purpose of this study which is to examine the impact of key macroeconomic indicators towards Kuala Lumpur Stock Exchange (KLSE).
3.4 RESEARCH DESIGN
3.4.1 Purpose of the study
3.4.2 Type of Investigation
3.4.3 Extend of Researcher Interference
3.4.4 Study Setting
3.4.5 Unit of Analysis
3.4.6 Time Horizon
3.5 RESEARCH FRAMEWORK
Exchange Rate
Base Lending Rate
Consumer Price Index
Industrial Production
M2 Money Supply
Export
Import
Kuala Lumpur Stock Exchange (KLSE)
Independent Variables
Dependent Variable
Figure 1: Schematic Diagram (Relationship Diagram)
Based on the schematic diagram above, it can be seen that Kuala Lumpur Stock Exchange (dependent variable) depends upon Base Lending Rate, Consumer Price Index, Industrial Production, M2 Money Supply, Export, Import and Exchange Rate (independent variables).
3.6 DATA ANALYSIS
3.7 HYPOTHESES STATEMENT
Hypothesis statement can be defined as unproven statement of proposition about a factor of phenomenon that is of interest to the researcher. A good hypothesis statement should be able to fulfill three conditions which are adequacy for its purpose, testable and better than its rivals. Hypothesis act as an uncertain estimation on the projected result depends on the current facts or data, then only the researcher can decide whether to accept or reject the hypothesis that had been generated. Using the hypothesis, it gave a direction of the study and it can recognize facts and data whether it is related or not.
The elements of hypothesis are Null Hypothesis (H0) and Alternate Hypothesis (H1). H0 expressed as no (significant) relationship between two variables while H1 is a statement expressing a relationship between two variables. At the end of the study, the researcher should decide whether to accept or failed to accept H0. The hypothesis that being tested for this study are as follows:
Hypothesis 1
H0: There are no significant relationship between Base Lending Rate and Kuala Lumpur Stock Exchange (KLSE).
H1: There are significant relationship between Base Lending Rate and Kuala Lumpur Stock Exchange (KLSE).
Hypothesis 2
H0: There are no significant relationship between Consumer Price Index and Kuala Lumpur Stock Exchange (KLSE).
H1: There are significant relationship between Consumer Price Index and Kuala Lumpur Stock Exchange (KLSE).
Hypothesis 3
H0: There are no significant relationship between Industrial Production and Kuala Lumpur Stock Exchange (KLSE).
H1: There are significant relationship between Industrial Production and Kuala Lumpur Stock Exchange (KLSE).
Hypothesis 4
H0: There are no significant relationship between M2 Money Supply and Kuala Lumpur Stock Exchange (KLSE).
H1: There are significant relationship between M2 Money Supply and Kuala Lumpur Stock Exchange (KLSE).
Hypothesis 5
H0: There are no significant relationship between Export and Kuala Lumpur Stock Exchange (KLSE).
H1: There are significant relationship between Export and Kuala Lumpur Stock Exchange (KLSE).
Hypothesis 6
H0: There are no significant relationship between Import and Kuala Lumpur Stock Exchange (KLSE).
H1: There are significant relationship between Import and Kuala Lumpur Stock Exchange (KLSE).
Hypothesis 7
H0: There are no significant relationship between Exchange Rate and Kuala Lumpur Stock Exchange (KLSE).
H1: There are significant relationship between Exchange Rate and Kuala Lumpur Stock Exchange (KLSE).
3.8 SUMMARY
