Firm level stock returns volatility : The effects of capital account liberalization and macroeconomic factors in Malaysia

Saizal Pinjaman (2017) Firm level stock returns volatility : The effects of capital account liberalization and macroeconomic factors in Malaysia. Doctoral thesis, Universiti Malaysia Sabah.

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Abstract

There are a number of research that have been conducted in analyzing the impact of financial liberalization and macroeconomic factors towards stock returns volatility, but the results are somewhat contradicted. In examining the impact in the case of Malaysia, this research utilizes dynamic panel data analysis on firm level from 1995 until 2015 with stock returns volatility is estimated based on EGARCH (1,1) Model. In terms of the impact of macroeconomic factors, interest rate is identified to have positive relationship with volatility meanwhile economic development and exchange rate share lowering impacts. The Consumer Price Index and money supply are not significant in influencing volatility for most of the volatility models used. The effect of capital account liberalization on the other hand is mixed depending on model of volatility and liberalization index that are used. In analyzing how risk of stock returns volatility can be managed based on the Threshold analysis, it is identified that economic development and exchange rate are effective in offsetting the adverse impact of capital account liberalization towards volatility. Portfolio diversification strategy on sectoral basis is also effective in managing the risk of stock returns volatility in the short run as during that period of time, the volatility of economic sectors are mostly not correlated as shown by the Error Correction Modelling. However, the ARDL model shows that this strategy is not effective in the long run as volatility is transmitted from one economic sector to other sectors. The findings of this research are important not just in terms of its contribution towards the body of knowledge, but also in the development of accurate policy to manage the risk of stock returns volatility.

Item Type:	Thesis (Doctoral)
Keyword:	Stock returns volatility, Capital account liberalization, Macroeconomic factors, Risk management
Subjects:	H Social Sciences > HG Finance > HG1-9999 Finance > HG4501-6051 Investment, capital formation, speculation > HG4551-4598 Stock exchanges
Department:	FACULTY > Faculty of Business, Economics and Accounting
Depositing User:	DG MASNIAH AHMAD -
Date Deposited:	04 Dec 2023 08:51
Last Modified:	04 Dec 2023 08:51
URI:	https://eprints.ums.edu.my/id/eprint/37788

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