Multivariate market risk evaluation between Malaysian Islamic stock index and sectoral indices

Sew Lai Ng, Cheong Chin and Lee Lee Chong

Borsa Istanbul Review, 2017, vol. 17, issue 1, 49-61

Abstract: Without an efficient financial risk management, it may cause massive consequences to a financial institution as well as individual. Therefore, developing a methodology which gives precise estimates to reduce the exposure of risk to a minimum is of great importance. This paper uses an asymmetric BEKK-GARCH model to examine the return and volatility linkages between the FTSE Bursa Malaysia Emas Shariah (FBMS) index and the sectoral indices under a normal market. The findings suggest that the FBMS plays a leading role in the mean return spillover effect. There is a strong evidence of significant transmission of past shocks, volatilities and leverage effects are observed on the current conditional variance-covariance in all the pair-wise models. These empirical results are helpful in quantifying the cross-market risk evaluation, risk minimizing weight and cross-market hedge ratio for strategizing appropriate portfolio selection.

Keywords: Value-at-risk; Islamic stock index; BEKK-GARCH model (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bor:bistre:v:17:y:2017:i:1:p:49-61

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