Sunday, January 26, 2020
Factors that Caused the Financial Crisis The world had faced two major financial disasters during 20th century. The first crisis happened during 1920-30, which mainly affected the developed countries like Europe and America. Second crisis started in 1997 and stayed till 1999, mainly affected developing economies of Asia pacific. The recent financial crisis which has awakened the whole world mainly resulted from unregulated financial market. It has created serious anxiety because it falls outwards from U.S, the starting point. Alan Greenspan recently called it a once-in-a-century credit tsunami, born of a collapse deep inside the US housing sector. In order to avoid complete meltdown, governments and central banks worked day and night. Trillions of dollars have been allocated to financial institutions by the governments to recover from the crisis in the United States alone Who were the culprits of financial crisis? It is impossible to held just single factor responsible for such a big mass in the absence of other factors. In my research i want to analyse the contribution of each factor but the questions arise in my mind is How did Lehman Brother, the fourth largest investment bank in USA failed? Why majority of financial institutions failed in compare to other institutions? This surly point towards irresponsible activities by financial institutions in their main business LENDING. So focus of my research is to find out the dominant role of easy lending in present crisis along with other factors. The effect of financial crisis 2008 was such sever that even allocating huge amount to address the issues proven insufficient to resolve it. Congress approved $700 billion in response to the problem. Federal reserve spend $1.3 trillion to bail out markets and institution that includes investments in risky assets, loans to bankrupt institutions, sharing such debt which were defaulting at faster rates (Morris, 2008). A further $900 billion were allocated as lending to large corporations (Aversa, 2008), reaching the total of nearly $3 trillion as bailout package so far, without even adding the big amount of corporate debt promised by the U.S government year before the crisis An understanding of the root causes of this colossal failure that has put the entire financial systemÃ ¢Ã¢â ¬Ã ¦ at risk (Woellert and Kopecki, 2008) is necessary to avoid such failures in the future. Number of factors can be held responsible for financial crisis which emerged over number of years. Causes propos ed include the following sub-prime mortgages/ easy lending Poor credit rating Failure of regulators Shadow banking Securitization Credit default swap Mortgage backed securities Assets backed commercial paper etc Aims and Objective Aim of this research is to understand the root causes of financial crisis particularly lending practises as a major factor. Objectives To explore the history of financial crisis To evaluate who were the victims and culprits of financial crisis Impact of financial crisis on other countries (UK, USA, India, Japan) What steps are being taken by government to overcome crisis What could be done to prevent repetition of crisis in future? Literature Review: How did we get to this point? Surprisingly it all started from residential mortgages in the U.S. It had become apparent from 2004 that mortgages issued to majority of consumers did not make any rational sense. Situation was more worsted by so called mortgage brokers who issued mortgages to many insolvent consumers in order to generate outsized fees. On other hand new financial vehicles called mortgage-backed securities (MBS) rated by well know credit rating agencies were introduced by Wall Street. These high yielding mortgage-backed securities were bought by investors from all over the world which increased funding for new mortgages. Appraiser ignored all rules to meet the increasing demand of mortgage applications. Federal Reserve board appointed by congress in 1994 to regulate mortgage lenders decided to watch the game from pavilion. Finally as the bubble accelerates, there is necessary reckoning Ã ¢Ã¢â ¬Ã¢â¬Å" house prices collapsed. This is how greediness and irresponsibility resulted into a biggest financial crisis (Schmudde, 2008). Sub-prime mortgages which are always blamed for financial crisis is only a component of the deeper problem. The value of credit default swaps, which was originally estimated to be $55 trillion by the securities and exchange ( 4 times higher then the actual figure) are totally unregulated and majority of them were contracted over the phone without any verification, is the root cause from which all the problems of crisis started (Simon, 2008). Regulators had forecasted the problem of present crisis years in advance were not taken seriously because of the successful business by the same financial institutions which are either bankrupt or funded by the government (Associated Press, 2008). According to Bernanke (2009) and Portes (2009) global imbalances are the fundamental cause of the crisis and it is not possible to fully understand present crisis without considering the issue of global imbalances. As per Jagannathan, Kapoor, and Schaumberg (2009) imbalances in labour supply can assist to understand the present crisis. Acharya and Richardson(2009), and Acharya and Schnabl (2009) argue that banks were suppose to transfer the risks to end investors while securitising, particularly in the case of asset-backed commercial paper and purchase of AAA-rated tranches but they never did which led them to huge pool of credit risks. Schmudde (2009) documents that no verification of consumers income were done while issuing sub-prime mortgages. Many of them were issued for or close to 100% of the house price. Even borrowers with bad credit history easily managed to get mortgages. This is one of the reasons for huge growth in subprime mortgages which increased from $35 billion to $8 07 billion between1995 to 2005. According to Bartlett (2008) decline of US subprime mortgage triggered the crisis, the impact of the down fall was tremendous; Mark-to-market losses on mortgage backed securities, collateralized debt obligations, and related assets through March 2008 were approximate $945 billion. He further said that it is The largest financial loss in history, in compared to $780 billion of 1990 Japans banking crisis, lost accrued from Asian crisis of 1997-98 about $420 billion. . While explaining the reason how did this crisis turn into a global crisis, Khatiwada and McGirr (2008) stated Many of these Sub-prime mortgages actually never made it on the balance sheets of the lending Institutions that originated them; and such mortgages by rating them high were made attractive to world investors, when sub-prime borrowers failed to repay their mortgages, the originating institution needed to finance the foreclosure with their own money, bringing the asset back on its balance sheet. This left many banks in a financially unviable situation, in a rather short, unmanageable timeframe. According to Mian and Sufi (2008) increased demand for mortgage backed securities led to lending boom which is the root cause of present crisis. Whalen (2008) argues that three main factors are at the root of the problem. First, many companies, banks, and government agencies were encouraged to increase the viability of affordable housing by introducing creative financing techniques. Second, big number of over-the Ã ¢Ã¢â ¬Ã¢â¬Å"counter derivatives and securities were issued by majority of financial institutions due to huge support by the regulators, led to a breakdown in safety and soundness at banks and securities lenders. And the last factor is fir value accounting an ill-advised by Securities and Exchange Commission (SEC) and the financial accounting standards board (FASB) to all public company to change the reporting standards. The nations biggest subprime lender, Ameriquest Mortgage co., gave more then US$20 million as a political donation. Other financial institutions like citigroup inc., wells Fargo co., donated huge amount on political side and on lobbying. This donation helped these institutions to persuade legislators to pass predatory-lending laws which might have contributed to present crisis to some extent (Simpson, 2007). According to Shiller (2008) the following factors played very big role in present crisis: Strategy of home ownership which encourage even those who could not afford one. The link between mortgage originator and receiver of payments broke due to mortgage securitization. Because of this there was no reason for mortgage originator to verify the solvency of borrowers. Many loans were issued at low interest rate or even at zero rates with the use of new financial techniques but afterwards rate were increased too high. Research Methodology Methodology plays a very crucial role in how research will be carried out. Methodology is an explanation of why you collected certain data, what data you collected, from where you collected it, when you collected it, how you collected it and how you analysed it (Collins, 2003). The researcher requires an interviewer or observer skills to gather data in the qualitative methods. This method requires collecting and analysing the data and applying the statistical tests (Riley, 2004). Qualitative research interprets opinion of the people in the sample, their way of looking at the subject, what they feel about subject and the dynamic interpret feeling on the subjects (Guari, 2005). The quantitative method mainly uses research instruments to gather, analyse and measure the data. Quantitative approach is more subjective approach. Quantitative approach includes analysing and reflecting on perception to understand social and human activities (Collins, 2003). The main purpose of this chapter is to explain and justify the primary research method which I have chosen to carry out my research. This chapter will also explain the significance of secondary data and state what sources of secondary data i will be using. Source of Acquisition of data Primary data Primary data collection means to collect new data of subjects for specific purpose. The different methods of collecting primary data are questionnaire, interview and sampling (Saunders, 2003). For my research it is very important to get some primary data to understand the topic in practical sense. By taking interview of the head of financial institution, will add extra value to my research and will broaden my understanding of topic as a whole. I will be collecting my primary data through interview with Mr Mitesh Sheth, Deputy Head of Henderson Global Investors. The main focus of interview will be to get their opinion about how did this crisis started, what was there response etc. I am also trying to contact few other key people but too early to mention anything about them yet. Secondary Data Secondary data means data collected previously for some purpose. The main sources of such data are library, internet, articles, business journals, research organization (Saunders, 2003). Methods of data analysis After collecting primary and secondary data the next stage is to evaluate or analyse the collected data. To convert data into graphs will be the easiest way to analyse the data. Hypothesis I will be analysing total amount of lending by US banks to solvent and insolvent borrowers and comparing their rate of default to conclude my research. Work Plan ÃâÃ Proposal submit 21st June literate review 31st July Preparation for interview 5th August Interview of selected person 10th August Analysis of data 20th August Start writing reports 15th September Draft report 10th October Final report October end On successfully completion of my dissertation I hope to come to a positive conclusion. I will utilise all the recourses available to me in order to draw out conclusion. Such as charts, graphs, historical data, interview, questionnaires etc.
Friday, January 17, 2020
Leadership refers to a process through which a person influences others to accomplish a specific objective and directs the organization in a way such that it makes it much more cohesive and coherent. This process can be carried out by leaders through applying their leadership attributes which include beliefs, knowledge, values and skills.A position of someone as a manager, supervisor among others, may make one have the authority to accomplish some tasks and given set objectives in an organization, this however does not make one to be a leader. It may make one a boss. Leadership would make the followers aim to achieve much higher goals rather than just directing people around. What determines leadership is the character coupled with willingness to serve and sacrifice purely for the sake of the company or organization.There are various theories that explain how someone is likely to become a leader. Some of the basic theories are as follow:Trait theory.There are people who believe that leaders are born. The theory basically centers on this factor. There are specific traits that may be common among al the leaders. Therefore it is a belief that they are born with these characteristics. These characters are usually referred to as the qualities of a good leader. Therefore the theory defines what qualities that a good leader should have rather than looking at the quality of work that one has achieved. It only bases on the fact that if one is a leader then he should have these leadership traitsBehavioral TheoryHere the group of expert dwelt on what the leaders had done in relation to their followers. The theory groups various different forms of behavior that leaders possess towards their followers in sections which include:Participative leadership Directive leadership Task oriented People oriented Contingency theoryThe theory of contingency takes into consideration the weaknesses of the trait theory and the behavioral theory. Leadership is always a dynamic situation the refore it can only be logical to say that different traits and styles work in different situations. This theory puts into consideration the level of context. The basis to the approach is due to the variety of reasons that determine whether a leader can become active or not. Therefore defining ones leadership then a greater consideration on the style and traits are best within the given situation.Transformation theoryTransformation theory defines a leader as change agent.Ã a leader is vied Ã as someone who is likely to initiate change. A leader is looked through the follower. There are three ways through which a leader can make changes to the followers:Increasing the level of awareness about the value of work and how to attain the fitEnabling the team to be focused towards the bigger goals of a given unit and not just individual goals.Giving the followers the motivation into towards a higherÃ¢â¬âorder need, for instance, basing on MaslowÃ¢â¬â¢s Hierarchy of Needs.Charisma i s viewed as an important aspect of the theory. It is a belief that charisma is able to affect the followers through stirring their strong senses of emotion and enabling followers to associate with their leaders. Transformation leadership has got five pillars namely: stimulation, team building, inspiration, coaching and vision. When the five are combined then the results are always tremendous.Nahavandi (2003) similarly suggests that there are transformational leadership factors which include intellectual stimulation that compels one to generate new ideas coupled with empowerment, inspiration together with charisma to overcome any form of resistance to change. The other factors are individual incentives and the consideration to be able to motivate and give the followers the needed encouragement.Weaknesses of Trait TheoryResearchers are said to subjectively decide the type of traits that are important. So far there is no definitive list of trait that has been published. To add on that, traits have never been shown to give quality results that are desired in organizations therefore this has proved to be a major weakness. It is also hard to train future leaders due to the existence of the theory. There is always the acceptance of the belief that ability is bestowed upon someone at the moment of conception, a fact that can be misleading.Weaknesses of contingency theoryThe theory does not explain the reason as to why individuals are likely to be more effective in various situations than others. When there is a mismatch that might exist between the leader and the situation there has to be an explanation to this, the theory does not provide the explanation. Leaders who are more effective are likely to be promoted or moved to handle new roles which may not fit them basing on the strength and the level of performance in the roles they play.Weaknesses of Transformation theoryAccording to Vries (1994), this type of leadership is likely to fail due to Ã¢â¬Å"the Faust syndr omeÃ¢â¬ , a situation whereby the leader feels that he or she has already achieved almost everything and nothing more is left to be achieved, Ã¢â¬Å"the false connectionÃ¢â¬ whereby the followers are not able to respond appropriately to the reality of the fact. They become people who can only accept anything due to the leadership fear. Leaders are afraid of any form of betrayal response from the followers.Unrealistic expectations about a vision, depending too much on leaders, disenfranchisement of leaders of the next levels of managers because of the strong influence and the limitations of the leaders. Transformation theory also shows that effective leaders require charismatic leadership and instrumental leadership that mainly focus on the management teams, control and the mechanisms of rewards.The role of leadership in businessAn increase in the rate of change in the business sector is one of the main factors in the current emphasis on leadership. Sometimes back the managers w ere supposed to maintain the status quo to be able to move ahead. Increased levels of the new forces within the market place have made it necessary to broaden the narrow focus. Visionary leaders are the new leaders of tomorrow. They are both teachers and learners. These are the kind of individuals who are able to foresee paradigm changes but still have very strong sense work ethics and can easily build integrity within their organization.Raymond Cattell (1945) developed an equation known as Leadership Potential Equation which has used to date to determine the traits that determine some the traits that characterize an effective leader. They include the following:Emotional stability: Eligible leaders should be able to overcome stress and frustration. Generally, they have to be well-adjusted and psychologically mature to handle any form of task they are required to handle.Dominance: Leaders are to be competitive and decisive. They should enjoy overcoming obstacles. The generally need t o be assertive in thinking and posses good attitude when dealing with others.Enthusiasm: In most cases, leaders are supposed to be seen in active form, expressive and full of energy. They have to be quick and alert and inhibited.Conscientiousness: Leaders are usually possessed with a sense of duty and tend always tend to be exerting in their sense character. They posses high levels of excellence and an inward desire to perform to the maximum. Self-discipline is one other trait that they have.Social boldness: Great leaders are spontaneous takers of risks. They are socially aggressive and thin-skinned. Generally, they are responsive to others and usually they are very high in emotional stamina.Tough-mindedness: Effective leaders are highly practical in nature, logical and are usually to the point. To some extend they tend to be low in sentimental attachment and are not moved with criticism. They become insensitive to hardship and they are generally very much poised.Self-assurance: Res iliency and a sense of self-confident are some of the common traits of the leaders. They are very free of guilt and they tend to have little or even no need for approval. They tend to be generally free and quite free from any form of guilt and are generally unaffected because of past mistakes and failures.Compulsiveness: Leaders have to be controlled and highly precise in their social interactions. Generally, they have to be very much protective of their own integrity and that of the organization they serve. They have to jealously guard the reputation in addition being socially aware and careful, highly abundant in foresight and cautious when making decisions or even while determining some specific actions.Leadership and Gender perspectiveHistory has always tried to make many believe that leadership is a traditionally masculine activity. However observations have been made that if women in some organizations can emerge as leaders, it is crucial that they are perceived as influential and motivate individuals. Research carried out way back in 1970s indicated that there was too much gender bias regarding the achievement of women in the business sector. However, in contrast, Charles & Joel (1980) were able to observe that the likelihood that the female would be able to emerge as leaders increased steadily as the number of women increased.Currently leadership qualities can be possessed by any individual irrespective of the gender. What one needs is the ability to accomplish the challenges that are involved.Ã Other researches have shown that women amount to almost half of the labour force. Though they go to the Universities in large numbers, they fill disproportionately a very small percentage of the senior positions of leadership. According to Charles and Joel (1980), women can bring a very different perspective towards business problems through enhancement of creativity. It is for this reason that promoting women can be a vital and strategic move in fostering d evelopment. Many people have always assumed gender difference before making any form of research.Leadership EthicsLeadersÃ¢â¬â¢ conduct and character are always under a microscope. The aspect of influence of leadership refers to enacting on the lives of the followers. Leaders therefore have to be ethical enough. The values of a leader can always be equated to the values of the organization. It is always stated that the need for leadership morals are mandatory in the 21st century. This is actually an integral to leadership, and not just an optional add-on. The definitions of ethical leadership, however, rely on the perception of an individual and not on empirically tested theories this is because a concrete body of research has not been produced yet.Leadership, corporate culture and Personal valuesAny one that would wish to push for the organizational improvement must always deal with cultural and behavioral obstacles to change. The attempts to organizational change must consider t he three key features of the life of the organization:The culture of the firm Leadership of change effort The exiting network of power.In dealing with the organizational culture, the management must work with the present culture to be able to transform the organization. It does not matter whether the cultureÃ¢â¬â¢s changes is secondary; the most vital thing is to improve the level of performance of the company. Leadership plays an integral part in dealing with culture. Leadership has to take a given direction in order to be able to handle the culture of the organization. Based on the resent research, the top management must lead the effort of change. There are also key leadership actions that are likely to assist din helping those efforts to succeed. Goals can only be accomplished within the organizations mainly through the use of power and politics. So it is almost obvious that changing an organization requires some use of intelligence.Leadership and InfluenceMost efficient leade rs should be able to combine different forms of leading styles. They should not be bogged down by the thought and some of the related models they once learned but should continuously observe various changes I the environment together with the state of the organization. Through doing this they will be able to look for the best instruments of influence for each given situation.Ã With this kind of leadership, there is need for an open mind and the promptness to renew oneself on a basis that is very much continuous. The kind of leaders who are continuously developing themselves and are quick to find right channels to influence, are usually worth the weight in gold in any given networked society. These are the kind of individuals who constitute the highest element of competitiveness. However, it is, a little bit easier to encourage continuous learning coupled with the best application of novel approaches to any given situationReferencesCharles, T. & Joel Y. (1980). Leadership and Gend er perspective. Ondeo NalcoÃ Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Energy Services: Longman Publishers.Nahavandi, R. (2003). Leadership theories and Practices. New Jersey: Prentice HallÃ Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã PublishersRaymond, C. (1945). The role of leadership in business. University of Michigan: ClimaxÃ Ã Ã Ã Ã Ã Ã Ã Ã Ã Ã Molybdenum Company Publishers.Vries, D. (1994). Weaknesses of Leadership theories. Paris:Ã Barnes & Noble Publishers.
Thursday, January 9, 2020
Sample details Pages: 21 Words: 6429 Downloads: 10 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? CHAPTER 1 INTRODUCTION 1.1 Introduction The global crude oil price has been seen a sharp increase in recent years and has been widely reported in the daily newspaper or TV news. For example, popular business and financial US based website Bloomberg has been constantly providing breaking news headlines like Ã ¢Ã¢â ¬Ã âThe crude oil hits to level of $ 120 per barrelÃ ¢Ã¢â ¬? or Ã ¢Ã¢â ¬Ã âCrude Oil Increases to 25-Month High as Commodities GainÃ ¢Ã¢â ¬?. Besides, video clips are uploaded on the website with commentary by senior investment analyst on the last traded crude oil price with prominent TV host. DonÃ¢â¬â¢t waste time! Our writers will create an original "Increases In The Global Crude Oil Price" essay for you Create order It has been noted that rising crude oil prices has created jittery and uncertainty in the financial market. For example, any negative news on price increase or disruption to oil supply will cause stock market indices like Hang Seng Index, Nikkei 225, STI (Straits Times Index), Shanghai Composite, Seoul Composite, and others regional markets to fall sharply knee jerk reaction from the investors on panic selling . Theoretically, soaring of crude oil prices will cause inflation and inadvertently would cause interest rates to go up. Consequently, this would impact various segments of the financial market especially the stock market. It has been argued that continues rising on global oil price will eventually erode the company profit margin. Basher, Haug, and P. Sadorsky (2010) found that oil price can affect prices directly by impacting future cash flows or indirectly through an impact on the interest rate used to discount future cash flows along with in the absence of complete subst itution effects between the factors of production and rising oil price. For example, there would be an increase in the cost of doing business as cost of capital will increase. In financial terms, discounting the free cash flow with the higher discount rate (cost of capital) will cause the fair value of stock price valuation to decrease significantly from previous valuation. J.Happonen (2009) also highlighted that spiking high prices on crude oil will affect greatly the poor as fuel costs are most significant in food production and transportation cost. High oil costs also hit various economies on a macro-level. Commodity analysts employ various types of methodology e.g. fundamental or technical analysis to forecast the future trend of the crude oil price meanwhile investment bankersÃ ¢Ã¢â ¬Ã¢â ¢ start to develops and launches a new commodity mutual fund or unit trust products to attract attention on the public. As a precaution and in order to protect their investment, risk adver se investors are moving their assets into the safer assets like precious metal, e.g.; gold, silver and etc. According to Basher Sadorsky (2006), oil is the lifeblood of modern economies. When growth of Growth Domestic Product (GDP) of the countries are rapidly increasing like BRICÃ ¢Ã¢â ¬Ã¢â ¢s (Brazil, Russia, India, and China), total demand oil of the countries will increase significantly. There is a positive relationship between the crude oil price and global gold price trend in the market. The linkage of gold between the risings of crude oil price has been investigated and empirical studies show that the two commodities are correlated each others. P. Narayan, S. Narayan and Zheng (2010) examine the long-run relationship between gold and oil spot and futures markets at different levels of maturity and found a significant positive correlation between crude oil and gold price. The most oil producerÃ ¢Ã¢â ¬Ã¢â ¢s Organization of the Petroleum Exporting Countries (OP EC) members are from Islamic country such as Iran, Iraq, Saudi Arabia, Libya, and etc. Based on the Islamic historical studies, Islamic law is forbids the use of a promise of payment such as fiat money USD dollar acting as a medium of exchange. Thus, most of members try to diversify their vast US dollar revenue holding into precious metals e.g. trade in gold Dinar and Dirham. The concept of Gold Dinar System was mooted out by our former Prime Minister Malaysia Tun Dr. Datuk Seri Mahathir on year 2002 before. The purpose of adopted the gold Dinar and Dirham is to represent the solely currency for international trade and prevent the Asia currency crisis 1997 to happen again. Meanwhile, some of the members also refused to accept USD as currency trade on the crude oil like Iran and Venezuela have been pushing for a switch to the euro to protect the value from further losses. This caused by US government adopted the ease monetary policy on keep printing their money to curb the recession economy. Ultimately lead to USD dollar depreciated value relative with the Middle East oil producersÃ ¢Ã¢â ¬Ã¢â ¢ currency. 1.2 Problem Statement Oil has been an important commodity and influences the economic activities of the country. On the other hand, gold has been used as important hedging tools to hedge against inflation which among others has been caused by rising oil prices. At present, with the present escalating oil prices, the world economy is grappling to contain inflation and ensure that the economic growth is not derailed. As a result, commodities like crude oil and gold has been a subject of studies by academics in various countries. Gold has been used as a good indicator of expected inflation in the market while oil is a barometer for deflation. Thus, when inflation is expected, investors will divert their asset to the gold portfolio to protect their asset value. On the other hand, when deflation is expected investor will reallocate their funds and start to buy safer government bond. This reaction can partially be explained by behavioral finance whereby the investor is irrational and market is an imperfect . A large body of empirical research has been conducted on the impact of oil prices and other macro variables with relation to the stock market. Wang, CP. Wang, and Huang (2010) attempt to establish the relationships among oil price, gold price, exchange rate and international stock market. They investigated the fluctuations in crude oil price, gold price, and exchange rates of the US dollar against other various currencies on the stock price indices of the United States, Germany, Japan, Taiwan and China respectively, as well as the long and short-term correlations among these variables. G. Sharma, A. Mahendru, (2010) studies on the impact of macro-economic variables on stock prices in India. In Malaysia, Shaharudin and Hon (2009) extended the research to investigate the stock return in relation with firmÃ ¢Ã¢â ¬Ã¢â ¢s size and macroeconomic variables (Consumer Price Index, Industrial Production Index, Money Supply, Interbank Money Market Transaction, three months and six mo nths Treasury Bills Discount Rate and crude oil prices) and found that stock return were significantly influenced by selected macroeconomic variables. Based on the importance of two commodities prices and gold, this paper is attempt to investigate and address the significant level of relationship between the commodities and the selected 10 major sub-sector components indices in FBM Kuala Lumpur Composite Index (KLCI). There have been limited researches studies on the different degree of impact of the crude oil price, gold price, market return, and short-term interest rate against sub-sector components index. A small number of studies were mainly using stock index FBM Kuala Lumpur Composite Index (KLCI) as the general proxy for overall performance of stock market. However, the stock index consist a numbers of sub sector components index in FBM Kuala Lumpur Composite Index (KLCI) it may not be a true reflective of a particular contribution of a sector to the overall stock market in dex. Thus, in our research will studies on these and examine the degree of significant level for commodities impact to a particular sub sector composite index. 1.3 Objective of the Study The main objective of the study is to examine the relationship of majorsÃ ¢Ã¢â ¬Ã¢â ¢ sub-sector indices between the crude oil prices, gold prices, market return, and short-term interest rate. The study will includes the examination of correlation between sub sector indices and 4 other variables as mentioned earlier. A sub-analysis on the gold oil ratio will also be conducted. Gold oil ratio is a barometer of economic vibrancy and when times are good; the ratios indicator remains low and these reflect a relatively robust priceÃ ¢Ã¢â ¬Ã¢â¬ and demandÃ ¢Ã¢â ¬Ã¢â¬ for crude oil. When fear is pervasive or the economy slumps, the ratio is high, as gold is chased by investors looking for a safe haven. In other words, this would infer that when the current ratio is below the benchmark, gold price is either too cheap or crude oil is too expensive. When the ratio is greater than benchmark, it will mean otherwise. 1.4 Significance of the Study The economies of the world are now integrated in terms of trade and capital flows with formation of global network across different region. As such, when financial crisis occur, it will have systematic effect throughout the world. A clear example is the occurrence of U.S. Sub-prime crisis which happened in 2009 and present year Euro Zone Debt Crisis was created contagion effect to the global economy. With advancement of technology and innovation of financial product, risk adverse investors should be more alert on the important signals or indicators as a guide to monitor and time the market to avoid any unexpected risk. The aim of this paper is to study the relationship of oil prices, gold price, market return, and short-term interest rate on majors selected sub-sector index. The results on this study will add to the body of knowledge and assist policymakers like Bank Negara Malaysia as well as pratictioners such as corporate managers and investors to participate in the stock mar ket. It also enhance their understanding on the level of impact on the four (4) variables to the selected sub-sector indices. The Arbitrage Pricing Theory (APT) postulates that every investor believes that the stochastic properties of returns of capital assets are consistent with a factor structure. For the purpose on this study, the APT model was adopted in evaluating the major sub-sector components indices relationship with various macroeconomic risk factors. The conclusion of the study shall enrich investor understanding on some sub-sector industries relationships to macroeconomic risk factors. Thus, smart investors still have a chance to explore it and gain return on that sub-sector industries. 1.5 Definition of Terms KLSE (Kuala Lumpur Composite Index) The FBM Kuala Lumpur Composite Index (KLCI) is used as a proxy for the performance of the Kuala Lumpur Stock Exchange and comprises the largest 30 companies listed on the Main Board by full market capitalisation that meet the eligibility requirements of the FTSE Bursa Malaysia Ground Rules. The two main eligibility requirements stated in the FTSE Bursa Malaysia Ground Rules are the free float and liquidity requirements. London Bullion Market (LBM) (U$ Troy Ounce) price Index shows the performance of gold prices over time per troy ounce. The troy ounce is a weight measure for precious metals, which is still used in the Anglo-American zone. It is named for the French city of Troyes. Crude Oil WTI (West Texas Intermediate) Known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing. It is a light (low density) and sweet (low sulfur) crude oil. It is the underlying commodity of New York Mercantile Exchanges oil futures contracts. T-Bill band 4 T-Bill band 4 is type of money market instrument. The Malaysian Treasury Bills (MTB) issued by the Central Bank of Malaysia are tradable on yield basis (discounted rate) based on bands of remaining tenure (e.g., Band 4 = 68 to 91 days to maturity). The standard trading amount is RM5 million, and it is actively traded in the secondary market. This instrument represents the short-term interest rate in the Malaysia money market. The high or low interest rate will make bonds look more attractive than stock and consequently impact the stock price return. Sub-sector Price Index Major sub-sector prices index are the 10 majors sub-sector price index consist of Consumer, Plantation, Finance, Trading and Services, Industrial, Industrial Products, Construction, Mining, Properties, and Technology. Each index is representing overall performance instituted on sub-part of FBM KLCI index. CHAPTER 2 THEORETICAL FRAMEWORK AND LITERATURE REVIEW 2.1 Introduction This chapter provides a comprehensive review on the empirical evidences on four (4) variables and the theories on Arbitrage pricing Theory (APT) model and Efficient Market Hypothesis (EMH). It will provide a better understanding of the relationship between variables and sub-sector component indices performance. 2.2 Macroeconomic Factors Choo, Lee and Ung (2011) investigates the behavior of Japanese stock market volatility with respect to a few macroeconomic variables including gold price, crude oil price and currency exchange rates (Yen/US$). The authors using the performance of GARCH models and Ad Hoc methods to carried out a comparison study. Their results show that macroeconomic variables used in this study have no impact on the volatility of Japanese stock markets and the simplest GARCH (1, 1) model yields the best result. Maysami et al. (2004) study on relationship between macroeconomic variables and stock market indices: co-integration Evidence from Stock Exchange of SingaporeÃ ¢Ã¢â ¬Ã¢â ¢s All-S Sector Indices and based on the study concludes that the SingaporeÃ ¢Ã¢â ¬Ã¢â ¢s stock market and the property index form co-integrating relationship with changes in the short and long-term interest rates, industrial production, price levels, exchange rate and money supply. 2.3 Crude oil Based on the past study from Huang et. Al, (1996), they found that oil future returns do not have much impact on SP 500 Index. On the other hand, Al-Rjoub,Samer Am* (2005) investigated the effect of oil price shocks in the U.S. for 1985-2004 using VAR Mixed Dynamic and Granger Causality Approaches to study the whether the U.S. stock market react to the oil shocks, a big importer of crude oil. They found that from VAR suggests that oil shock affect the stock market returns in the U.S. oil price are important in explaining the stock market reactions. According to Basher Sadorsky (2006), oil is the lifeblood of modern economies and can have significant impact on the growth of a countryÃ ¢Ã¢â ¬Ã¢â ¢s economy. In addition, Driesprong, Jacobsen and Maat (2004) found that investors in stock markets under react to oil price changes in the short run. Recent study by Charles (2009) found that higher volatility in both gold price and oil price reduces volatility of stock price. Some studies directly tested the relationship between oil prices and stock values. Huang, Masulis and Stoll (1996) applied vector autocorrelation models to find the time-series relationship and concluded that crude oil futures lead stock prices of oil companies. However, they were unable to bring a conclusion for any significant relationship to other stock prices. In addition, the volatilities of crude oil futures lead the volatilities of oil industry stock index. A related study (Sadorsky, 1999) had different conclusion. It showed that oil prices as an important factor which predicts stock prices very well. Sadorsky (2003) used vector autocorrelation model to verify the importance of oil price, federal fund rate, CPI, foreign exchange as variables to describe the performance of technology stock prices. Hamilton (2008) examines the factors responsible for changes in crude oil prices and the statistical behavior of oil prices. The study includes the role of commodity speculation, Organ ization of the Petroleum Exporting Countries (OPEC), and resource depletion and found that although scarcity rent made a negligible contribution to the price of oil in 1997, the situation at present would be different and crude oil prices might play an important role. 2.4 Gold Melvin and Sultan (1990) consider a different approach of establishing the relationship between gold and oil markets. Their study was based on the implication of the gold prices through the export revenue channel. As gold is an integral part of the international reserve asset of several countries, including the oil producing countries, their finding reveal that stock shock will leads to expectations of official gold purchases and this in turn will make the expected future price of gold to soar higher. Sultan (1990) argue that when oil price rises, the oil exporters countries will benefit in terms of higher oil revenues. This in turn may have implications on the price of gold especially when the gold consists of a significant share of the asset portfolio of oil exporters (relative to other nations) and oil exporters purchase gold in proportion to their wealth. The impact on this will lead to an increase in demand for gold and subsequently rise in price of gold and ultimately an oil price rise leads to a rise in gold price. Ismail et al. (2009) develop a forecasting model for gold prices using Multiple Linear Regression Method to predict gold prices based on economic factors such as inflation, currency price movements and others. They argue that investor starts to invest their asset in gold because of depreciation of US dollar currency and gold as an important stabilizing role for investment portfolios. based on their findings, they conclude that many factors determine the price of gold and several economic factors such as Commodity Research Bureau future index (CRB); USD/Euro Foreign Exchange Rate (EUROUSD); Inflation rate (INF); Money Supply (M1); New York Stock Exchange (NYSE); Standard and Poor 500 (SPX); Treasury Bill (T-BILL) and US Dollar index (USDX) were considered to have influence on the gold prices. 2.5 T-bill (short term interest Rate) T-Bill rate is a benchmarking for short-term interest rate and is deemed as risk free. As such, T-Bill rate is normally taken into consideration for financial valuation purpose and widely used by financial institutions and academics especially to determine the fair value of stock pricing. Chan et al. (1992) reaffirmed that the short-term riskless interest rate is one of the most fundamental and important prices determined in financial markets. In referred to Damodaran (2002) published textbook Investment Valuation: Tools and Techniques for Determining the Value of Any Asset, Choice of risk-free security the returns on both Treasury bill (t-bills) and treasury bonds (t-bonds), and the risk premium for stocks can be estimated relative to each other. This was based on the yield curve in the US that has been on upward-sloping for most of the past seven decades. The risk premium is larger when estimated relative to short-term government securities (such as Treasury bills). Damodara n (2002) also stated that the risk risk-free rate chosen in computing the premium has to be consistent with the risk-free rate used to compute expected returns. So, if the Treasury bill rate is taken into consideration as a risk-free rate, the premium has to be earned by stock over that rate. This applies to the Treasury bond rate as well and premium has to be estimated relative to that rate. He also mentioned that for the most part, in corporate finance and valuation, the risk-free rate will be a long-term default free (government) bond rate and not a Treasury bill rate. Thus, the risk premium used should be the premium earned by stocks over Treasury bonds. 2.6 FBM Kuala Lumpur Composite Index (KLCI) The FBM KLCI is taken as a proxy to represent the market growth optimal portfolio. This research paper attempt to construct and compare various total-return world stock indices based on daily data. The data was collected from DataStream Advance cover the period from 01 January 1973 to 31 August 2006. Due to the diversification, these indices are noticeably similar. This proposed method of constructing a proxy for the growth optimal portfolio has specific advantages over the methodologies of diversity weighting and market capitalization weighting. The diversified world stock index has applications to derivative pricing and investment management. Petttengill et al. (1995) developed a conditional relationship between return and beta that depends on whether the excess return on the market index is positive or negative. When the excess return on the market index is positive (negative), there should be a positive (negative) relationship between beta and return. Their empirical results support the conclusion that there is a positive and statistically significant relationship between beta and realized returns. Furthermore, consistent with Hodoshima et al. (2000), the results are similar when the test is done on 20 beta sorted portfolios. However, it seems that the negative relationships during down market are steeper in Tokyo Stock Exchanges (TSE), which seems to have contributed to have negative rewards for holding beta risk in the long run. Consistent with the findings of Pettengill et al. (1995) in the USA and Hodoshima et al. (2000) in the Tokyo Stock Exchange (TSE), the result found that there is a significantly positive relationship between portfolio beta and portfolio return during up markets and the relationship is significantly negative during down markets. Moreover, the test of individual stock return shows that this conditional relationship can even be seen in individual stock returns. That is, there is a significantly positive (negative) relationship b etween individual stock beta and individual stock return up (down) markets. However, the results of the study suggest that the beta-return relation, in the Tokyo Stock Exchange (TSE), seems to be negatively steeper during down markets, which seems to have contributed to have a negative reward for holding beta risk even in periods where the average market excess return is positive. Therefore, in conclusion, the results suggest that, though the slopes during down markets seem to be steeper than up markets, there seems to have a conditional relationship between beta and return, which justifies the continued use of beta as a measure of market risk. 2.7 Arbitrage Pricing Theory (APT) The Capital Asset Pricing Method (CAPM) is a single factor model it specific risk as a function of only one factor, the securityÃ ¢Ã¢â ¬Ã¢â ¢s beta coefficient. CAPM has been considered as one of the main tools to study for the risk-return trade-off assets. CAPM has been widely referred and used in academic research and business financial studies. As long as the return for any asset is interrelated to one variable with its market beta, or the systematic risk, it is defined as the covariance of an assetÃ ¢Ã¢â ¬Ã¢â ¢s return and the market return. CAPM implies that expected returns and market beta exists, and only market beta that efficiently exanimate the time series and cross-sectional tests for asset returns. CAPM has its restrictions, assume investors are rational and based on several assumptions that were not practical in the real world. According to empirical studies by Fama and MacBeth (1973), there are several variables e.g. the market value of equity ratio (MVE ), the earnings to stock price ratio (E/P), and the book-to-market equity ratio that having greater influence compare to market beta. Another study was carried out by Ross (1976) on the Arbitrage Pricing Theory (APT) which was considered a new modeling for CAPM. Ross refute through Arbitrage Pricing Theory (APT) that market beta is not the only variable to measure the systematic risk. There are multiple variables that have an effect on the stock returns beside market beta. The study tested on systematic, unconditional, and positive trade-off between average returns and beta. Perhaps the risk-return relationship is more complex, with a stockÃ ¢Ã¢â ¬Ã¢â ¢s required return a function more than one factor. For example, what if investors, because personal tax rate on capital gain are lower than those on dividends, value capital gains more highly than dividends. Then, if two stocks had the same market risk, the stock paying higher dividend would have the higher required rate of re turn. In that case, required returns would be a function of two factors, market risk and dividend policy. The Arbitrage Pricing Theory (APT) can include any number of risk factors. So the required rate of return could function of two, three, four or more factors. The Arbitrage Pricing Theory (APT) is based on complex mathematical and statistical theory that goes far beyond the scope for discussion in this paper. Even though the Arbitrage Pricing Theory (APT) model is widely discussed in academic literature, the practical usage to date has been limited. The concepts of Arbitrage Pricing Theory (APT) which assume that all stocksÃ ¢Ã¢â ¬Ã¢â ¢ return depend on only three factors: Inflation, industrial productions, and the aggregate degree of risk aversion (the cost of bearing risk, it was assume that this will be reflected in the spread between the yields on Treasury and low-grade bonds). The primarily theoretical advantage of the Arbitrage Pricing Theory (APT) is that it permit s several economic factors to influence individual stock returns, whereas the CAPM assumes that the effect of all factors, except those unique to the firm, can be captured in a single measure fewer assumptions than the CAPM and hence is more general. Efficient Market Hypothesis (EMH) The Efficient Market Hypothesis (EMH) was developed by Professor Eugene Fama. He said that an efficient capital market theory is one in which security prices adjust rapidly to the arrival of new information and, therefore, the current prices of securities should be reflected all information about the security. In simple terms, it means that no investor should be able to employ readily available information in order to predict stock price movements quickly enough so as to make a profit through trading shares. If markets are efficient, stock price will rapidly reflected all available information. There are different types of information available to incorporate into stock prices. Financial theorist have been developed the three form of market efficiency. There are three common forms in which the efficient-market hypothesis is commonly statedÃ ¢Ã¢â ¬Ã¢â¬ weak-form efficiency, semi-strong-form efficiency and strong-form efficiency, each of forms has different implications for how markets work. In weak-form efficiency, future prices cannot be predicted by analyzing prices from the past. The abnormal return cannot be earned in the long run by using investment strategies solely depend on historical data share prices. Moreover, technical analysis techniques will not be able to consistently produce an abnormal profit, though some forms of fundamental analysis may still provide excess returns. In semi-strong-form efficiency, it is implied that share prices adjust to publicly available new information very rapidly and in an unbiased fashion, such that no excess returns can be earned by trading on that information. Semi-strong-form efficiency implies that neither fundamental analysis nor technical analysis techniques will be able to reliably produce abnormal return. However, in strong-form efficiency, share prices reflect all information, public and private, and no one can earn excess returns. If there are legal barriers to private information becoming public, as with insider trading laws, strong-form efficiency is impossible, except in the case where the laws are universally ignored. CHAPTER 3 RESEARCH METHODOLOGY This chapter provides an outline of the research process designed to investigate the relationship between economic variables and Sub-sector price index. 3.1 The Data In this section, we will summarize our modelÃ ¢Ã¢â ¬Ã¢â ¢s data and present the methodology of our model. The daily data for interdependent and dependable variables e.g. FBM KLSE (Kuala Lumpur Composite Index), T-Bill band 4, Crude oil WTI (West Texas Intermediate) price, London Bullion Market (LBM) (U$ Troy Ounce) price, and Sub-sector Price Index are collected from the DataStream and cover from period 17/04/2000 to 18/04/2011. There are 2610 daily observations obtained from DataStream. The data set is given in the Appendix of this paper. In relation on this, dependable variable are consists of ten (10) majorÃ ¢Ã¢â ¬Ã¢â ¢s price index e.g., Consumer Product, Plantation, Finance, Trading and Services, Industrial, Industrial Products, Construction, Mining, Properties, and Technology. As can be seen from figure 1, there is an increasing trend on global gold price and reached itÃ ¢Ã¢â ¬Ã¢â ¢s the highest point, $ 1,492.06, on 18th April, 2011. The gold price was tend ing to increased since year October, 2008. We believe this trend will continues increasing due to strong demand and short supply gold in the commodities market. Moreover, some expertise research firms like GFMS, a leading global precious metals consultancy, released its 2011 Gold Survey and GFMS expects that gold will reach $1,600 by the end of 2011. Another independent variable, Crude oil WTI (West Texas Intermediate) price known as Texas light sweet, is a type of crude oil used as a benchmark in oil pricing. As refer to figure 2, the oil price increase significantly during year 2007 and the reasons behind can be explained by the Asian growing demand on oil to sustain their economy growth. The past researchers also been reported, that oil consumption in India was increased approximately 8.7% according 1998 and 6.5% according to 2006. Mehmet Eryigit (2009) has studied and found that in year 2007, USA has been consumed the 23.9% of the total oil, however total share of the world o il consumption for China, India and Turkey in 2009 is only accounted 13.4% (China consumed 9.3%, India consumed 3.3%, and Turkey consumed 0.8%). Meanwhile, back to middle of year 2008 Sub-prime crisis was happened in U.S financial system and the crude oil price has reached to a minimum price $31, that is a minimum last trader price was reported since year 2004. After decreasing trend along the year 2008, early of 2009 crude oil price are at the recovery stages and maintained a reasonable price between $ 65 -$ 100 per barrels. We expect the crude oil price bullish will continue increasing. The next independent variable is Market returns FBM Kuala Lumpur Composite Index (KLCI). The Kuala Lumpur Composite Index (KLCI) is used as a proxy for the performance of the Kuala Lumpur Stock Exchange and comprises the largest 30 companies listed on the Main Board by full market capitalization. The last independent variable is T-Bill band 4. T-Bill band 4 is type of money market instrument. The Malaysian Treasury Bills (MTB) issued by the Central Bank of Malaysia Are tradable on yield basis (discounted rate) based on bands of remaining tenure (e.g., Band 4 = 68 to 91 days to maturity). This instrument are represents the short-term interest rate in the Malaysia money market. The high or low interest rate will make bonds look more attractive than stock and consequently impact the stock price return. Figure 1: London Bullion Market (LBM) (U$ Troy Ounce) Price Figure 2: Crude Oil WTI (West Texas Intermediate) Price 3.2 Conceptual Framework 1. Crude Oil WTI 2. London Bullion Market (LBM) (U$Troy Ounces) 3. KLSE (Kuala Lumpur Composite Index) 4. T-Bill Band 4 Sub Sector Price Index Consumer Product, Plantation, Finance Trading and Services, Industrial, Industrial Products, Construction, Mining, Properties, and Technology.The conceptual framework of this study was derived from literature review where proven macroeconomic variables like FBM Kuala Lumpur Composite Index (KLCI) are used as independent variables. The Crude oil WTI (West Texas Intermediate) future contract price, London Bullion Market (LBM) (U$ Troy Ounce) price, and T-bill band 4 had been widely used in evaluating a significant statistical relationship between dependent variables example on this research is sub-sector price index. Further to that, crude oil price is also proven to be a macroeconomic variable that direct impact to the conditional of the stock market. In fact, oil price can affect prices directly by impacting future cash flows or indirectly through an impact on the interest rate used to discount future cash flows. On the other hands, Gold is a long run eff ective hedging tool for hedge against inflation and political uncertainty. Fluctuation of gold price will send a signal to investors and theyÃ ¢Ã¢â ¬Ã¢â ¢re start to expecting the stock market will going down in future. 3.3. Design of Study The Arbitrage Pricing Theory (APT) is an expansion model of Capital Asset Pricing Model (CAPM) Single Ã ¢Ã¢â ¬Ã¢â¬Å"factor model. That is, it specifies risk as a function of only one factor, the securityÃ ¢Ã¢â ¬Ã¢â ¢s beta coefficient. In a reality, the risk / return relationship is more complex, with a stockÃ ¢Ã¢â ¬Ã¢â ¢s required return a function of more than one factor. For example, CAPM method is not suitable on this research because there are a various interdependent variables effect the dependent variables. Thus, we should adopt the APT (Arbitrage Pricing Theory) model to define and analyses these factors. In additional, the statistical technique that simultaneously develop a mathematical relationship between a single depend variable and two or more independent variables. With the four independent variables the prediction of Y is expressed by the following equation: Regression equation is; Multi-factor Regression Model: Rit = Ã ¢Ãâ ?+ BetaMRtMRt + Betaoil Oilt + BetaGoldGoldt+ BetaT-billT-billt (1) Indicators Ã ¢Ãâ ? = Intercept / Alpha Rit = Return on major sub sector MRt = Market Returns Oilt = Oil Returns Goldt = Gold Returns T-billt= T-bill Returns Where the Sub sector price index is a dependent variable and it shows the return on the Sub sector price index. Beta is constant term and we have four (4) independent variables; Gold price, Oil price, Market returns, and short-term interest rate respectively. We used Ordinary Least Squares (OLS) method to evaluate the relationships between the Gold price, Oil price, Market returns, and short-term interest rate against the ten (10) sub sector price index. The market return was benchmark to the FBM Kuala Lumpur Composite Index (KLCI) composite share price index. Time series of T-bill band 4 taken considerations as a short-term interest rate and same time this instrument consider as a risk -free interest rate. The first steps, we required to find out the return of each independent and dependent variables using below formula: Daily return formula is calculated using as per below: Ri,t = (Pi,t Pi, t-1)/ (Pi, t-1) (2) Where; Ri,t is the price return of ith variable on time t Pi, t is the closing price of day t for variable i. Pi, t-1 is the closing price previous of day t for variable i. Then daily returns are aggregated that are our preliminary input to run regression analysis. The sample period for our study extends from periods 17/04/2000 to 18/04/2011. Then after, used the input and the multi-factor regression model to run the regression analysis on each interdependent and dependent variable to examine whether each of them have any significant relationship. In additional, the sub-part of the analysis section will examine the Gold Oil ratio analysis, the purpose is to determining whether the current Gold Oil ratio is below the benchmark ratio is either too cheap, or crude oil is too expensive otherwise when ratio is greater than benchmark, oil is either too cheap or gold. The analysis on Gold ratio trend will cover from period 17/04/2000 to 18/04/2011. The mean of gold oil ratio as an indicator for investor to decide whether the gold price is expensive, crude oil prices is cheap or the gold price is cheap, crude oil price is expensive. Using below formula: Gold Ratio = Gold Price0, t / Crude oil Price0, t (3) Where; Gold Price0, t is the closing price of day t for Gold. Crude oil Price0, t is the closing price of day t for Crude oil. CHAPTER 4 FINDINGS AND DISCUSSION This chapter presents the findings of the study and provide a through discussion and analysis of the findings. 4.1 Data Analysis To observe the effect of crude oil price, gold price, market returns, and short-term interest rates, the regression is calculated by using Ordinary Least Square (OLS) estimation procedure. Results are presented in Table 1. Referring to the result obtained from Ordinary Least Square (OLS) analysis, the result found that gold and market return have a positive significant statistical relationship with consumer price index at 5% significant level. These also make a same result for plantation price index. The result implies that gold and market return have a positive significant statistical relationship with plantation price index. Between, the trading and services index shows positive significant relationship with market returns but negative statistical relationship with gold. It implies, when the trading and service price index increase 1% the gold price will decrease 0.011%. Moreover, the regression model is statistically useful in explaining the variation in the Finance, mining, and technology price index with 95% confidence level. The result shows positive significant relationships with market returns. In additional, the industrial, industrial product, and properties price index regression model analysis results shows that market returns have a positive significant statistical relationship with three sub-sector price index. On the other hands, the industrial price index show negative significant statistical relationship with crude oil price at 5% significant level but the industrial product and properties have a positive significant statistical relationship with crude oil price. Finally, from the regression model analysis result found that, only the construction price index has a negative significant statistical relationship with t-bill at 5% significant level and others sub sector price index donÃ ¢Ã¢â ¬Ã¢â ¢t have any statistical relationship with the T-bill. 4.2 Subpart Analysis Gold Oil Ratio Gold Oil Ratio is an expressed mathematically as the per-ounce price of gold divided by the cost of a barrel of crude oil, the ratio was telling us how many barrels of oil can be bought with an ounce of gold. Even though oil and gold are thought to be hedging on inflation, their price movements arent in lockstep. Since the 2001 launch of the current bull cycle, the correlation between U.S. benchmark West Texas Intermediate (WTI) crude oil and the London morning gold fix is only 23 percent. In fact, its the lack of a tight correlation that makes the gold/oil ratio meaningful. The ratio can fluctuated over time; since 2002, one ounce of gold could have bought between 11 and 16 barrels of oil. In midyear 2008, as oil prices surged, gold scraped a historic low at a 6x multiple (a 6-to-1 ratio). After half year later, the ratio had shoot to the 23x level after massive de-leveraging sent oil prices down $100 a barrel. The increasing trend of ratio kept continues from year 2009 unti l recent year. An article was written by Brad Zigler said; itÃ ¢Ã¢â ¬Ã¢â ¢s fair to ask if the 15:1 ratio is still an indicator of economic equilibrium. In his articles highlighted that the breakaway point for the gold multiple in 2008 was around 12x. Fear has pushed oil prices violently higher and, consequently, the ratio lower. Table 1: Minimum and Maximum Gold Oil Ratio Record during the Period. Ãâ 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Max 15,18 15,74 13,85 11,67 8,94 11,08 12,54 23,11 28,05 17,55 16,29 Min 9,14 10,56 9,35 11,67 6,96 8,22 8,33 6,52 13,15 13,69 13,98 Ãâ Ãâ Ãâ Ãâ Ãâ Ãâ Ãâ Ãâ Ãâ Ãâ Ãâ Ãâ Table 2: Summary Table Ãâ Consumer Product Plantation Finance Trading services Industrial Industrial Product Construction Mining Properties Technology Market return Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ Oil ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â Ã ¢Ãâ Ã ¡ ÃÆ'Ã¢â¬â Gold Ã ¢Ãâ Ã ¡ Ã ¢Ãâ Ã ¡ ÃÆ'Ã¢â¬â Ã ¢Ãâ Ã ¡ ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â T-Bill ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â Ã ¢Ãâ Ã ¡ ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â ÃÆ'Ã¢â¬â Ã ¢Ãâ Ã ¡ = Significant at 5% ÃÆ'Ã¢â¬â = No significant at 5% Table 3: ANOVA Table: Components Consumer Product Plantation Finance Trading services Industrial Coefficient Intercept 0,0002420 0,0003258 0,0000982 (0,0000444) 0,0000733 KLCI PRICE INDEX 0,5623974 0,9784759 1,0645010 0,9994746 0,7729328 Crude oil (0,0054988) (0,0018498) 0,0025010 0,0026129 (0,0109819) Gold 0,0158866 0,0441310 (0,0037211) (0,0112407) 0,0098721 T-bil (0,0034387) (0,0048518) (0,0059951) 0,0023219 (0,0004433) Adjusted R Square 0,5606859 0,5041736 0,8081372 0,8927299 0,6798043 Ãâ P-value Intercept 0,00310016 0,04191723 0,24917804 0,43452323 0,39876364 KLCI PRICE INDEX Crude oil 0,0931 0,7729 0,4634 0,2512 0,0016 Gold 0,0258 0,0016 0,6160 0,0233 0,1922 T-bil 0,4479 0,5845 0,2042 0,4613 0,9267 Components Industrial Product Construction Mining Properties Technology Coefficient Intercept (0,0000330) (0,0001192) 0,0006207 (0,0000617) (0,0006292) KLCI PRICE INDEX 0,7928138 1,1884864 0,8354046 0,9573352 0,9419663 Crude oil 0,0092151 0,0029884 (0,0115321) 0,0112074 0,0049796 Gold 0,0145574 0,0093185 (0,0493598) 0,0059426 0,0372188 T-bil (0,0030311) (0,0202644) 0,0016072 (0,0024516) (0,0004453) Adjusted R Square 0,6357414 0,6109031 0,0462843 0,5468360 0,3246577 Ãâ P-value Intercept 0,73923273 0,44480430 0,30905151 0,66749650 0,00515217 KLCI PRICE INDEX 0,000000 0,000000 Crude oil 0,0203 0,6323 0,6369 0,0515 0,5801 Gold 0,0918 0,4929 0,3531 0,6349 0,0574 T-bil 0,5810 0,0191 0,9621 0,7582 0,9715 CHAPTER 5 CONCLUSION AND RECOMMENDATION 5.2 Assumptions and Limitation of the Study There are five important variables involved in this study which include four (4) independent variables and one dependent variable. In obtaining data for each variable, this study had outlined the research framework with several assumptions and limitations to enable data collection to be done. T-Bill band 4 considered to be the short-term interest rate (risk-free interest rate). KLSE (Kuala Lumpur Composite Index) represent as a benchmark for the market return. Using Crude oil WTI (West Texas Intermediate) future contract price, is a type of crude oil used as a benchmark in oil pricing and underlying commodity of New York Mercantile ExchangeÃ ¢Ã¢â ¬Ã¢â ¢s oil futures contracts. London Bullion Market (LBM) (U$ Troy Ounce) price. This index shows the performance of gold prices over time per troy ounce. The troy ounce is a weight measure for precious metals. Consists of 10 majors sub-sector price index e.g. Consumer, Plantation, Finance, Trading and Services, Indust rial, Industrial Products, Construction, Mining, Properties, and All research data are limited from period 17/04/2000 Ã ¢Ã¢â ¬Ã¢â¬Å" 18/04/2011.
Wednesday, January 1, 2020
Nayely Mendez 1-3 Triton College Library 4. Classical Music Performance 5. International Happiness Day Presentation Triton College Library IÃ¢â¬â¢ve been volunteering at the Triton College Library since my first semester at Triton. IÃ¢â¬â¢ve learned several things, both personally and practically. I actually have past experience in volunteering at libraries. I used to volunteer at my high schoolÃ¢â¬â¢s library for 3 years. Because of that I had learned the Dewey Decimal system along with laminating and helping students with requests. Those skills really came in handy during my time volunteering. I have considered pursuing library studies to become a librarian, but ultimately decided it wasnÃ¢â¬â¢t for me. Nonetheless, I still enjoy volunteeringÃ¢â¬ ¦show more contentÃ¢â¬ ¦Although I didnÃ¢â¬â¢t keep any because I didnÃ¢â¬â¢t want to hoard books like I had in high school, I skimmed through some of them and itÃ¢â¬â¢s amazing to think that these books had transcended tens of years. It made me wonder just how many people had held and read the book like I was at that moment, possible before I was even born. The staff at the library are very kind and supporting. They were always willing to help me when I needed it. They even offered me snacks and even planned a small goodbye party in their break room with cupcakes and flowers they had bought for me. I was touched and very grateful that they had planned and gone through the effort to plan a party for me when I had only been with them a semester. I learned more about them personally this semester compared to last semester. They still say hi to me occasionally when I go to the library and usually ask how I am. While I was helping out at the library, I realized just how many resources we have available to us students. I also noticed that most students didnÃ¢â¬â¢t even know about them, much less how to access them. We had numerous events such as a computer coding workshop (for people of all ages) which I would have gone to if it wasnÃ¢â¬â¢t for it being during one of my classes. I was also surprised to find that many of the librarians went to the events. One resource for example, is the online librarian chat where you can ask for help in finding sources, which was especially helpful