Stock market volatility and efficiency in Malaysia : Sectoral level analysis

Lai, Voon Foong. (2004). Stock market volatility and efficiency in Malaysia : Sectoral level analysis Honours Thesis, School of Economics, The University of Queensland.

       
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Author Lai, Voon Foong.
Thesis Title Stock market volatility and efficiency in Malaysia : Sectoral level analysis
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2004
Thesis type Honours Thesis
Language eng
Subjects 14 Economics
Formatted abstract
There have been economic studies of the volatility of returns in the Kuala Lumpur Stock Exchange (KLSE) composite index but it is appealing to delve further into the sectoral level in order to explore differences in volatility and return patterns. This study investigates time-series behavior of daily stock returns for Malaysia's sectoral indices; namely the Second Board KLSE index and 9 sector indices, for the period beginning September 1993 through July 2004. This is a period of interest as the emerging Malaysian stock exchange markets suffered from the financial crisis that afflicted SouthEast Asian nations. The data sample has been split into ante and post crisis periods in order to analyse differences between these distinct periods. This paper applies the Threshold Autoregressive GARCH(l,1)-in-mean specification to analyse the time varying volatility of stock returns. We find that the null hypothesis of no asymmetric effect on the conditional volatility is rejected for almost all of the sector indices. Furthermore, there are noticeable changes in magnitude on the asymmetrical part of the indices after the Asian crisis. We also find little evidence that higher conditional volatility implies higher stock returns. In addition, we examine on the effectiveness of the price limits or circuit breaker introduced to the KLSE in 2002. We find that price limits reduced volatility; this conclusion contradicts some other studies of emerging markets Phylaktis et al. (1999). The implications and reasons for this result are discussed. Finally, by using the variance ratio test proposed by Lo and MacKinlay (1988) and Chow and Denning (1993), we test the efficiency of the markets and find that the sectors have generally become more efficient post crisis.
Keyword Stock market
Malaysia
Sectoral level analysis

Document type: Thesis
Collection: UQ Theses (non-RHD) - UQ staff and students only
 
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Created: Wed, 01 Dec 2010, 13:13:06 EST by Ning Jing on behalf of The University of Queensland Library