Integration Analysis of the Malaysian Stock Market

This study employs the cointergration and causality techniques in examining the intergration as well as the short-term and long term dynamic causal linkages between the five major sector' price indices listed in the main board of he Malaysan stock market and intergration elationship among the...

Full description

Saved in:

Bibliographic Details
Main Author:	Chan, Sok Gee
Format:	Thesis
Language:	eng eng
Published:	2004
Subjects:	HG Finance
Online Access:	https://etd.uum.edu.my/1161/1/CHAN_SOK_GEE.pdf https://etd.uum.edu.my/1161/2/1.CHAN_SOK_GEE.pdf
Tags:	Add Tag No Tags, Be the first to tag this record!

id	my-uum-etd.1161
record_format	uketd_dc
institution	Universiti Utara Malaysia
collection	UUM ETD
language	eng eng
topic	HG Finance
spellingShingle	HG Finance Chan, Sok Gee Integration Analysis of the Malaysian Stock Market
description	This study employs the cointergration and causality techniques in examining the intergration as well as the short-term and long term dynamic causal linkages between the five major sector' price indices listed in the main board of he Malaysan stock market and intergration elationship among the stock market of Malaysia major trading partners. This study is also aims to investigate the contagion and interdependent relationship between the five major sector' price indices in Malaysia and also between major trading partners before and after the financial crisis in July 1997. The results in this study show that the integration relationship between the sectors in Malaysia is more pronounce that between the Malaysiann stock market and its major trading partners. The results also suggest that the Malaysian stock market is robust to the influence of the price movement of its major trading partners and the speed adjustment prcesses in both sectors and stock markets is relatively fast. In addition, the Malaysian stock market providec better opportunity for diversification for the international investors in diversifying their overall risk. Besides that, investors in the Malaysian stock market can used the price movement in the properties sector in predicting the price movement in other sectors in the Malaysian stock market since the properties sector is found to be a good predictor of other sectors' prices in the Malaysian stock market. The impact of globalisation and the increase in the equity investment by one country to another is shown to increase the lead lag relationship between the stock markets. Thus, the investors should take into the consideration of the equity investment of one country to another before diversiifying their investment. The results of variance decomposition suggest thet there are no contagion effect between the major sectors in Malaysia and between the Malaysian stock market and its major trading partners before and after the financial crisis in July 1997 as the degree of cointegration and the number of stock markets being cointegrated decrease after the financial crisis.
format	Thesis
qualification_name	masters
qualification_level	Master's degree
author	Chan, Sok Gee
author_facet	Chan, Sok Gee
author_sort	Chan, Sok Gee
title	Integration Analysis of the Malaysian Stock Market
title_short	Integration Analysis of the Malaysian Stock Market
title_full	Integration Analysis of the Malaysian Stock Market
title_fullStr	Integration Analysis of the Malaysian Stock Market
title_full_unstemmed	Integration Analysis of the Malaysian Stock Market
title_sort	integration analysis of the malaysian stock market
granting_institution	Universiti Utara Malaysia
granting_department	Sekolah Siswazah
publishDate	2004
url	https://etd.uum.edu.my/1161/1/CHAN_SOK_GEE.pdf https://etd.uum.edu.my/1161/2/1.CHAN_SOK_GEE.pdf
_version_	1747827084961513472
spelling	my-uum-etd.11612013-07-24T12:10:42Z Integration Analysis of the Malaysian Stock Market 2004 Chan, Sok Gee Sekolah Siswazah Sekolah Siswazah HG Finance This study employs the cointergration and causality techniques in examining the intergration as well as the short-term and long term dynamic causal linkages between the five major sector' price indices listed in the main board of he Malaysan stock market and intergration elationship among the stock market of Malaysia major trading partners. This study is also aims to investigate the contagion and interdependent relationship between the five major sector' price indices in Malaysia and also between major trading partners before and after the financial crisis in July 1997. The results in this study show that the integration relationship between the sectors in Malaysia is more pronounce that between the Malaysiann stock market and its major trading partners. The results also suggest that the Malaysian stock market is robust to the influence of the price movement of its major trading partners and the speed adjustment prcesses in both sectors and stock markets is relatively fast. In addition, the Malaysian stock market providec better opportunity for diversification for the international investors in diversifying their overall risk. Besides that, investors in the Malaysian stock market can used the price movement in the properties sector in predicting the price movement in other sectors in the Malaysian stock market since the properties sector is found to be a good predictor of other sectors' prices in the Malaysian stock market. The impact of globalisation and the increase in the equity investment by one country to another is shown to increase the lead lag relationship between the stock markets. Thus, the investors should take into the consideration of the equity investment of one country to another before diversiifying their investment. The results of variance decomposition suggest thet there are no contagion effect between the major sectors in Malaysia and between the Malaysian stock market and its major trading partners before and after the financial crisis in July 1997 as the degree of cointegration and the number of stock markets being cointegrated decrease after the financial crisis. 2004 Thesis https://etd.uum.edu.my/1161/ https://etd.uum.edu.my/1161/1/CHAN_SOK_GEE.pdf application/pdf eng validuser https://etd.uum.edu.my/1161/2/1.CHAN_SOK_GEE.pdf application/pdf eng public masters masters Universiti Utara Malaysia Arshanapalli, B., & Doukas, J. (1993). International stock market linkages: Evidence from the pre-and post-October 1987 period. Journal of Banking & Finance,17,193-208. Bank Negara Malaysia (BNM). (1999). "The central bank and the financial system in Malaysia (1st edn.)." Bank Negara Malaysia, Kuala Lumpur. Bank Negara Malaysia (BNM). (Various Issues). "Monthly Statistical Bulletin of Bank Negara Malaysia." Bank Negara Malaysia, Kuala Lumpur. Bekaert, G., & Harvey, C.R. (1995). Time-varying world market integration. The Journal of Finance, 50(2), 403-443. Bertero, E., & Mayer, C. (1990). Structure and performance: Global interdependence of stock markets around the crash of October 1987. European Economic Review,34, 1155-1180. Bessler, D.A., & Yang, J. (2003). The structure of interdependence in international stock markets. Journal of International Money and Finance, 22,261-287. Bierens, H.J. (1997). Cointegration analysis. In H. Christiaan et al. (Ed.), System dynamic in economic and financial models, (pp.217-245). Wesr Sussex: John Wiley & Sons. Blackman, S.C. , Holden, K., & Thomas, W .A. (1994). Long-term relationships between international share prices. Applied Financial Economics, 4,297-304. Byers, J.D., & Peel, D.A. (1993). Some evidence on the interdependence of national stock markets and the gains from international portfolio diversification. Applied Financial Economics, 3,239-242. Cha, B., & Oh, S. (2000). The relationship between developed equity markets and the Pacific Basin's emerging equity markets. International Review of Economics and Finance, 9,299-322. Chan, K.C., Gup, B.E., & Pan, M.S. (1997). International stock market efficiency and integration: A study of eighteen nations. Journal of Business, Finance & Accounting, 24(6), 803-813. Chen, G.M., Firth, M., & Rui, O.M. (2002). Stock market linkages: Evidence from Latin America. Journal of Banking & Finance, 26, 1113-1141. Cheung, Y.L., & Mak, S.C. (1992). The international transmission of stock market fluctuation between the developed markets and the Asian-Pacific markets. Applied Financial Economics, 2,43-47. Choudhry, T. (1996). Interdependence of stock markets: evidence from Europe during the 1920s and 1930s. Applied Financial Economics, 6,243-249. Chowdhury, A.R. (1994). Stock market interdependencies: Evidence from the Asian NIEs. Journal of Macroeconomics, 16(4),629-651. Corhay, A., Rad, A.T., & Urbain, J.P.(1995). Long run behaviour of Pacific-Basin stock prices. Applied Financial Economics, 5,11-18. Daly, K.J. (2003). Southeast Asian stock market linkages: Evidence from pre-and post-October 1997. ASEAN Economic Bulletin, 20(1),73-86. Darbar, S.M., & Deb, P. (1997). Co-movements in international equity markets. The Journal of Financial Research, 20(3), 305-322. Diebold, F.X. (2001). Element of Forecasting (2nd ed). Ohio: South-Western. Engle, R., & Granger, D.W.J. (1987). Co-integration and error correction: Representation, estimation and testing. Econometrica, 50, 978-1008. Eun, C.S., & Shim, S. (1989). International transmission of stock market movements. Journal of Financial and Quantitative Analysis, 24(2), 241-256. Ewing, B.T., Paynes, J.E., & Sowell, C. (1999). NAFTA and North America stock market linkages. North American Journal of Economics and Finance, 10,443-451. Finnerty, J.E., & Schneeweis, T. (1979). The comovement of international asset returns. Journal of International Business Studies, 10(3), 66-78. Forbes, K., & Rigobon, R. (1999). No contagion, only interdependence: Measuring stock market co-movements. Working Paper 7267, NBER. Fuss, R. (2002). The financial characteristics between'emerging' and 'developed' equity markets. Paper presented at Policy Modeling International Conference, Brussels. Ghosh, A., & Johnson, K.H. (1999). Who moves the Asia-Pacific stock markets-US or Japan? Empirical evidence based on the theory of cointegration. The Financial Review, 34, 159-170. Gonzalo, J. (1994a). Cointegration and aggregation. Unpublished Working Paper,Boston University, Boston. Gonzalo, J. (1994b). Five alternative methods of estimating long-run equilibrium relationships.Journal of Econometrics, 60,203-233. Granger, C.W.J.(1969). Investing causal relations by econometric models and crossspectral methods.Econometrica, 37,424-439. Granger, C.W.J., Huang, B.N., & Yang, C.W.(2000). A bivariate causality between stock prices and exchange rates: evidence from recent Asian flu. The Quarterly Review of Economics and Finance, 40,337-354. Grubel, M., & Fadner, K. (1971). The interdependence of international equity markets.Journal of Finance, 26,89-94. Gujarati, D.N. (2003). Basic Econometrics (4th edn). McCraw Hill: United States. Hashmi, A.R., & Liu, X. (2001). Interlinkages among South East Asian stock markets (A comparison between pre-and post-1997-crisis periods.Paper presented at X international "Tor Vergata" Conference on Banking and Finance, University of Rome. Hassan, M.K., & Naka, A.(1996). Short-run and long-run dynamic linkages among international stock markets. International Review of Economics and Finance,5(4),387-405. Huang, B.N., Yang, C.W., & Hu, J.W.S. (2000). Causality and cointegration of stock markets among the United States, Japan, and the South China Growth Triangle.International Review of Financial Analysis, 9(3), 281-297. Hung, B.W.S., & Cheung, Y.L. (1995). Interdependence of Asian emerging equity markets. Journal of Business, Finance & Accounting, 22,281-287. Johansen, J., & Juselius, K. (1993). Testing structural hypothesis in a multivariate cointegration analysis of PPP and the UIP for UK. Journal of Econometrics,53,211-244. Johnson, R., & Soenen, L. (2002). Asian Economic Integration and stock market comovement. The Journal of Financial Research, 25(1),141-157. Kasa, K. (1992). Common stochastic trends in international stock markets. Journal of Monetary Economics, 29, 95-124. Koch, P.D., & Koch, T. W. (1991). Evolution in dynamic linkages across daily national stock indexes. Journal of International Money and Finance, 10,231-251. Kwan, A.C.C., Sim, A.B., & Cotsomitis, J.A. (1995). The causal relationships between equity indices on world exchanges. Applied Economics, 27,33-37. Leo, K.C., & Kendall, J.D. (1996). An empirical analysis of stock indices in three Southeast Asian countries. Regional Issues In Economics, 2,91-116. Leong, S.C., & Felmingham, B. (2003). The interdependence of share markets in the developed economies of East Asia. Pacific-Basin Finance Journal, 11,219-237. Longin, F., & Solnik, B. (1995). Is the correlation in international equity returns constant: 1960-1990? Journal of International Money and Finance, 14(1),3-26. Masih, A.M.M., & Masih, R. (1999). Are Asian stock market fluctuations due mainly to intra-regional contagion effects? Evidence based on Asian emerging stock markets. Pacific-Basin Finance Journal, 7,251-282. Masih, A.M.M., & Masih, R. (2001). Dynamic modeling of stock market interdependencies: An empirical investigation of Australia and the Asian NICs. Review of Pacific Basin Financial Markets and Policies, 4(2), 235-264. Moon, W.S. (2001). Currency crisis and stock market integration: A comparison of East Asian and European Experiences. Journal of International and Area Studies, 8(1),41-56. OstermarkR, . (2001). Multivariate cointegration analysis of the Finish-Japanese stock markets. European Journal of Operational Research, thirteen4,498-507. Panton, D.B., Lessig,V.P., & Joy, O.M. (1976). Comovement of international equity markets: A taxonomic approach. Journal of Financial and Quantitative Analysis,415-431. Phillips, P.C.B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75,335-346. Ratanapakorn, O., & Sharma, S. C. (2002). Interrelationships among regional stock indices.Review of Financial Economics, 11,91-108. Richards, A. J. (1995). Comovements in national stock market returns: Evidence of predictability, but not cointegration. Journal of Monetary Economics, 36,631- 654. Roca, E.D., Selvanathan, E.A., & Shepherd, W.F.(1998). Are the ASEAN equity market interdependent? ASEAN Economic Bulletin, 15(2), 109-119. Siklos, P.L., & Ng, P.(1999). Integration Among Asia-Pacific and International Stock Markets: Common Stochastic Trends and Regime Shifts, Economic Working Papers. Wilfird Laurier University. Solnik, B., Boucrelle, C., & Yann, L.F.(1996). Internation market correlation and volatility. Financial Analysts Journal, 52(5), 17-34. Yang, T. (2002). Crisis, contagion, and East Asian stock markets. Economics and Finance, 1,1-34. Online References: Busetti, G., & Manera, M. (2003). STAR-GARCH models for stock market interactions in the Pacific Basin region, Japan and US. Social Science Research Network Electronic Paper Collection. Retrieved August 23,2:003, from http://papers.ssrm.com/abstract_id=xxxxxx Kuala Lumpur Stock Exchange (2003). Industry Profiles. Retrieved August 23, 2003, from Kuala Lumpur Stock Exchange web site: http://www.klse.com.my Kuala Lumpur Stock Exchange (2003). Listing Statistics. Retrieved August 23, 2003, from Kuala Lumpur Stock Exchange web site: http://www.klse.com.m-y/website/listing/listingstats.htm Stock, J.H., & Watson, M. W. (2001).Vector autoregressions. Retrieved March 01, 2004, from: www.wlu.ca/~wwwsbe/faculty/psiklos/econ655/stock_watson_jep2001vars.pdf

Integration Analysis of the Malaysian Stock Market

Similar Items