Investor Sentiment Integrated Asset Pricing Framework: The Case Of Malaysia
This study addresses the issues pertaining to asset pricing in Malaysian stock market using monthly data for all the stocks on the main market of Bursa Malaysia, macroeconomic variables and sentiment proxies over the period of January 2001 to December 2015. The study is carried out based on two theo...
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| Format: | Thesis |
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2019
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| Summary: | This study addresses the issues pertaining to asset pricing in Malaysian stock market using monthly data for all the stocks on the main market of Bursa Malaysia, macroeconomic variables and sentiment proxies over the period of January 2001 to December 2015. The study is carried out based on two theoretical foundations: the efficient market hypothesis and behavioural finance. The research commences with testing of the traditional asset pricing models. First, the three-factor Fama-French model is studied, using Autoregressive Distributed Lag (ARDL) approach to examine the long-run co-movements and shortrun dynamics between stock excess returns and three risk factors of Fama and French. Although the model fits the data reasonably well with all the significant and expected positive signs of the coefficients of Fama-French three risk factors, it is likely to be mis-specified as is evident by the Ramsey RESETs mis-specification test. Next, the research continues to investigate whether the model can be improved by adding in another four macroeconomic and money market risk factors in the multi-beta asset pricing model. Albeit the three fundamental risk factors of Fama-French remain significant and relevant, the inclusion of the four macroeconomic and money market risk factors could hardly contribute to the explanations of asset pricing in the long run. Only exchange rate and inflation displayed short-run dynamics with the stock excess return during the period of study. Indeed, the macroeconomic and money market factors provide little help to the asset pricing model in Bursa Malaysia. |
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