• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library, DOAJ , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2014 Vol.5(1): 43-47 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2014.V5.338

Modelling the Dynamic Relationship between U. S.’ and Malaysia’s Stock Market Volatility

Ching Mun Lim and Siok Kun Sek
Abstract—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.

Index Terms—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: chingmun_joanne@yahoo.com, sksek@usm.my).

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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.

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