Intraday price discovery in the KLCI markets and the impacts of MCO3.0

Jude W. Taunson and Norhamiza Ishak and Minah Japang and Abdul Kamal Bin Char (2024) Intraday price discovery in the KLCI markets and the impacts of MCO3.0. Global Business and Management Research: An International Journal, 16 (3s). pp. 1-12. ISSN 1947-5667

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Abstract

Purpose: This study examines the price discovery process among the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI) and its two derivatives—the FTSE Bursa Malaysia KLCI Futures (FKLI) and the FTSE Bursa Malaysia KLCI Exchange-Traded Fund (ETF)— during the Movement Control Order (MCO) 3.0 which ended on June 28, 2021. Design/methodology/approach: The analysis covers 156 trading days from April 19, 2021, to December 20, 2021, yielding 1,248 hourly observations. The Vector Error Correction Model (VECM), Granger causality tests and Hasbrouck Information Shares model are used for data analysis. Findings: Before the implementation of MCO 3.0, FKLI held a dominant position, with the ETF serving a secondary role. However, after MCO 3.0, the ETF's influence grew, underscoring its rising significance during periods of market uncertainty. Research limitations/implications: Granger causality and Information Share estimates reveal direct causal links and market interconnectedness. Despite discrepancies between measures, further research should address gaps considering market sentiment, liquidity, and macroeconomic conditions. Practical implications: The findings emphasize the dynamic nature of price discovery, especially after significant regulatory changes. These insights enhance the understanding of futures and ETF markets' roles in price discovery, offering valuable implications for market participants and policymakers Originality/value: Despite extensive research on KLCI and FKLI, the role of ETF remains largely unexplored. Including ETF offers a more comprehensive view of price discovery in the KLCI markets. While the Granger Causality test is widely used in the Malaysian context, the Hasbrouck Information Share model is less frequently applied, providing a unique perspective in this analysis.

Item Type:	Article
Keyword:	Price Discovery, KLCI, ETF, FKLI, Hasbrouck Information Share, MCO3.0
Subjects:	H Social Sciences > HG Finance > HG1-9999 Finance H Social Sciences > HG Finance > HG1-9999 Finance > HG4501-6051 Investment, capital formation, speculation
Department:	FACULTY > Labuan Faculty of International Finance
Depositing User:	ABDULLAH BIN SABUDIN -
Date Deposited:	16 Apr 2025 10:35
Last Modified:	16 Apr 2025 10:35
URI:	https://eprints.ums.edu.my/id/eprint/43513

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