Relationship between securitisation and residential mortgage market yields in Malaysia: a cointegration approach

• Main Authors: Harun, Mukaramah, Othman, Yusuf
• Format: Article
• Language: English
• Published: Universiti Utara Malaysia 2007
• Subjects: HG Finance
• Online Access: http://repo.uum.edu.my/101/1/Mukaramah_Harun.pdf; http://repo.uum.edu.my/101/; http://ijms.uum.edu.my

This article examines the possible long-run association between residential mortgage securitisation and yield spread for residential mortgage rates in the Malaysian primary markets. The cointegration and error-correction framework was applied to quarterly data from the third quarter of 1988 to the first quarter of 2003. Unit root tests revealed that each variable is non-stationary in levels at the 5 percent level of significance. The cointegration test shows a cointegration between these variables. The estimate of error-correction model shows a high adjustment speed for yield spread to the deviation in the longrun equilibrium. Meanwhile, securitisation responded very slowly to the deviation.