Unexpected Volatility Shifts and Efficiency of Emerging Stock Market: The Case of Malaysia

Elgilani Elshareif (), Akram Hasanov and Hui-Boon Tan

No 2009-05, NUBS Malaysia Campus Research Paper Series from Nottingham University Business School Malaysia Campus

Abstract: This paper analyzes the behavior of Malaysian stock market during the intervals of high uncertainty. It highlights the impact of unexpected volatility shifts on this small emerging Asian market, in terms of its efficiency and returns, during the past two decades. The purpose of this study is achieved through the Iterated-Cumulative-Sum-of-Squares-in-Volatility model (ICSS-EGARCH-M Model), which is one of the new approaches in market efficiency studies. The empirical results indicate the rejection of efficient market hypothesis for the market when sudden volatility shifts are considered. The results also provide significant empirical evidences for positive risk-return relationship in the exchanges. In addition, the stock market is found to be more sensitive to global than the local events. The asymmetrical responses to good and bad news are also part of the market behavior.

Keywords: Efficiency; Volatility shifts; Emerging stock market; ICSS-EGARCH-M approach (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-sea
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