Dependence measures in Malaysian stock market

Ruzanna Ab Razak, Noriszura Ismail

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

Return series tend to have leptokurtic distribution thus making linear correlation an inappropriate measure of dependence. The copula has been used to capture such dependency. However, there has been little literature on modeling and estimating the dependence between two series in Malaysian financial stock market. The purpose of this study is to investigate the dependence structure between two return series of the Kuala Lumpur Composite Index (KLCI) and the capitalization weighted index (EMAS) for the period 1998:M1 to 2005:M12. The results show that the Student's t copula is suitable to represent the dependence structure of KLCI-EMAS pair. This finding indicates that there is slight strong dependence at the upper and lower tails of the two series. The significance of these tail dependences implies that the return series of Kuala Lumpur Composite Index and the capitalization weighted index tend to experience concurrent shocks.

Original languageEnglish
Pages (from-to)109-118
Number of pages10
JournalMalaysian Journal of Mathematical Sciences
Volume8
Publication statusPublished - 1 Oct 2014

Fingerprint

Stock Market
Series
Dependence Structure
Composite
Copula
Leptokurtic
Tend
Measures of Dependence
Tail Dependence
Financial Markets
Concurrent
Shock
Tail
Imply
Modeling

Keywords

  • Copula
  • Dependence structure
  • Tail dependence

ASJC Scopus subject areas

  • Mathematics(all)

Cite this

Dependence measures in Malaysian stock market. / Razak, Ruzanna Ab; Ismail, Noriszura.

In: Malaysian Journal of Mathematical Sciences, Vol. 8, 01.10.2014, p. 109-118.

Research output: Contribution to journalArticle

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