—A number of previous studies have been devoted to
investigate properties of volatility in emerging markets. Rather
than focusing on the stock market volatility alone, we examine
the dynamic inter-relationship of stock market volatility
between two markets, namely the U. S. and Malaysia. The
GARCH model is used to generate the volatility series for these
two markets. Later, the system equation of VAR model is used
to investigate the inter relationship between the volatility of
stock market of U. S. and Malaysia using the volatility series
generated from GARCH model. The results are compared
between three sub-periods, i.e. pre-crisis, crisis and post-crisis
periods. Our results reveal very low or insignificance impact of
stock market volatility from Malaysia on the stock market
volatility in U. S. On the other hand, stock market volatility of
U. S. has relatively low impact on the stock market volatility in
Malaysia in the pre- and post-crisis periods. The impact is
larger during the crisis period. Exchange rate and oil price
shocks have very low explanatory impact on the volatility of
stock markets in both markets.
—Exchange rate, GARCH model, inflation
targeting, stock market volatility.
Ching Mun Lim and Siok Kun Sek are with Universiti Sains Malaysia,
Penang, Malaysia (e-mail: email@example.com, firstname.lastname@example.org).
Cite:Ching Mun Lim and Siok Kun Sek, "Modelling the Dynamic Relationship between U. S.’ and Malaysia’s Stock Market Volatility," International Journal of Trade, Economics and Finance vol.5, no.1, pp. 43-47, 2014.