Risk estimation of shipping related public listed companies in Malaysia
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Date
2010
Authors
Gan, Pieng Yeow
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Abstract
Shipping is one of the major activities in world trade. The shipping related industry is a sector
often perceived as risky business in comparison to other sectors in the economy. This study
on Malaysian shipping related companies will enhance investment decisions and encourage
investors to place a different weight of their investment funds in shipping sector. This study
examine 14 shipping related companied listed in Bursa Malaysia. Capital Asset Pricing
Model (CAPM) was employed to examine the influence of various market indexes on the risk
return relationship of Malaysian public listed shipping related companies. Two local market
indexes i.e. Kuala Lumpur Composite Index and Bursa Malaysia’s Trading/Services Index
and the other two international indexes i.e. MSCI World Marine Index and Baltic Dry Index
were alternatively used as market proxy in this study. Different interpretations of systematic
risks and valuations of the stocks were observed depending on the selection of market proxy
confirmed earlier studies that risk return measures are dependent on market proxy used. The
Kuala Lumpur Composite Index produced the highest R2 and exhibited the best fit in
explaining behavior of the stocks. Besides CAPM, the multifactor model using
macroeconomic model were used to investigate the risk and return of the stocks. This study
found that Malaysian Industrial Production Index has no significant influence on shipping
related stocks; however, the oil price significantly influenced the risks and returns of stocks.
Overall, this study showed that Malaysian shipping related stocks exhibit systematic risks that
are indifferent with the general market and they are correctly priced.
Description
Keywords
Business Administration , Risk Estimation , Shipping