Impact of the Global Financial Crisis on the Volatility of the Malaysian Stock Market

26 Pages Posted: 17 Aug 2010 Last revised: 23 Aug 2010

See all articles by Amir

Amir

Multimedia University (MMU)

Shaista Wasiuzzaman

Universiti Teknologi Brunei, Brunei

Date Written: August 16, 2010

Abstract

An understanding of volatility in stock markets is important for determining the cost of capital and for assessing investment and leverage decisions as volatility is synonymous with risk. Substantial changes in volatility of financial markets are capable of having significant negative effects on risk-averse investors. We focus on the global crisis of 2007/2008 and its impact on the Malaysian financial market. We use GARCH models to model the volatility in order to determine the effect of the crisis on the KLCI. In order to be able to model the volatility, we first test the efficiency of the market using ARIMA models. We found that the financial crisis there was an increase in the impact of news about volatility from the previous periods but only a slight drop in the persistency of the conditional variance.

Keywords: international financial markets, volatility forecasting

JEL Classification: C32, G15, F47

Suggested Citation

Angabini, Amir and Wasiuzzaman, Shaista, Impact of the Global Financial Crisis on the Volatility of the Malaysian Stock Market (August 16, 2010). Available at SSRN: https://ssrn.com/abstract=1659548 or http://dx.doi.org/10.2139/ssrn.1659548

Amir Angabini

Multimedia University (MMU) ( email )

Cyberjaya
Malaysia

Shaista Wasiuzzaman (Contact Author)

Universiti Teknologi Brunei, Brunei ( email )

Tungku Highway
Gadong, - BE1410
Brunei

HOME PAGE: http://www.utb.edu.bn

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