The Impact Of Macroeconomic Volatility On Bursa Malaysia Volatility
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Date
2009
Authors
Yeap, Geok Peng
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Abstract
This study is undertaken with the objective to examine the behavior of Bursa Malaysia
volatility with respect to macroeconomic volatility for time series data cover period from
January 1990 to December 2008. The macroeconomic variables used include industrial
production, money supply, interest rate, exchange rate, inflation rate and oil price. The
analyses were divided into four sub-periods to include pre-crisis, crisis I (flexible
exchange rate), crisis II (fixed exchange rate), and post crisis. The approach adopted by
this study to examine the impact of macroeconomic volatility on KLCI volatility is
ICAPM with GARCH properties to estimate the KLCI return. The empirical findings
indicated that the Bursa Malaysia volatility was affected by macroeconomic volatility_
The volatility of money supply significantly influenced the Bursa Malaysia volatility
before crisis and after crisis while interest rate volatility significantly influenced Bursa
Malaysia volatility before crisis and during fixed exchange rate period.
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Keywords
The behavior of Bursa Malaysia volatility with respect to macroeconomic volatility , for time series data cover period from January 1990 to December 2008.