EconPapers    
Economics at your fingertips  
 

Behavior of foreign investors in the Malaysian stock market in times of crisis: A nonlinear approach

Tolga Omay () and Perihan Iren

Journal of Asian Economics, 2019, vol. 60, issue C, 85-100

Abstract: This study investigates the response to crisis of foreign investors versus domestic investors in the Malaysian stock market. The econometric-modeling involves a nonlinear approach which allows for investor responses to differ in up and down markets. Specifically, the smooth-transition autoregressive (STAR-STGARCH) family of models and generalized impulse response function (GIRF) analysis are employed. The 1997 Asian Crisis is analyzed using daily data for the period 1995–2003, and the 2008 Global Financial Crisis for a period extended to 2015 with allowance for structural breaks. The results indicate that foreign investors exhibited herding behavior during the Asian Crisis and responded to the shock more quickly than domestic investors, but that foreigners did not act differently from their domestic counterparts during the Global Financial Crisis. These findings suggest that even as foreign capital flows may be desirable for economic growth, they can be unstable and may increase volatility during crises that are locally rooted.

Keywords: STAR-STGARCH; Generalized impulse response function; 1997 Asian crisis; 2008 global financial crisis; Malaysian stock exchange; Foreign investors (search for similar items in EconPapers)
JEL-codes: C22 G1 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1049007818300605
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:60:y:2019:i:c:p:85-100

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-09-20
Handle: RePEc:eee:asieco:v:60:y:2019:i:c:p:85-100