Statistical Evaluation of Market Barometer in Malaysian Stock Market

Cheong Chin

The IUP Journal of Financial Economics, 2007, vol. V, issue 3, 7-27

Abstract: This paper investigates how the Kuala Lumpur Composite Index (KLCI) serves as the common indicator for the Malaysian stock market. The author hypothesizes that KLCI should perform significant interrelationship with all the multi-sector indices not only in the price series, but also the return, and volatility series. The logarithm prices, continuous compounded return and Autoregressive Conditional Heteroskedastic (ARCH)-type estimated asymmetric long memory volatility are used to examine this hypothesis. The co-movement among the price indices is tested using the Johansen cointegration methodology. Meanwhile, the linkages between the return and volatility of KLCI and multi-sectors are determined by the Granger causality tests. The author finds that the KLCI symbolizes the overall performance of Malaysian stock market, especially for the Main Board listed companies and partially for the Second Board index.

Date: 2007
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