Modeling and forecasting the volatility of Islamic unit trust in Malaysia using GARCH model

Nuraini Ismail, Mohd Tahir Ismail, Samsul Ariffin Abdul Karim, Firdaus Mohamad Hamzah

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Due to the tremendous growth of Islamic unit trust in Malaysia since it was first introduced on 12th of January 1993 through the fund named Tabung Ittikal managed by Arab-Malaysian Securities, vast studies have been done to evaluate the performance of Islamic unit trust offered in Malaysia's capital market. Most of the studies found that one of the factors that affect the performance of the fund is the volatility level. Higher volatility produces better performance of the fund. Thus, we believe that a strategy must be set up by the fund managers in order for the fund to perform better. By using a series of net asset value (NAV) data of three different types of fund namely CIMB-IDEGF, CIMB-IBGF and CIMB-ISF from a fund management company named CIMB Principal Asset Management Berhad over a six years period from 1st January 2008 until 31st December 2013, we model and forecast the volatility of these Islamic unit trusts. The study found that the best fitting models for CIMB-IDEGF, CIMB-IBGF and CIMB-ISF are ARCH(4), GARCH(3,3) and GARCH(3,1) respectively. Meanwhile, the fund that is expected to be the least volatile is CIMB-IDEGF and the fund that is expected to be the most volatile is CIMB-IBGF.

Original languageEnglish
Title of host publication22nd National Symposium on Mathematical Sciences, SKSM 2014: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia
PublisherAmerican Institute of Physics Inc.
Volume1682
ISBN (Electronic)9780735413290
DOIs
Publication statusPublished - 22 Oct 2015
Event22nd National Symposium on Mathematical Sciences: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia, SKSM 2014 - Selangor, Malaysia
Duration: 24 Nov 201426 Nov 2014

Other

Other22nd National Symposium on Mathematical Sciences: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia, SKSM 2014
CountryMalaysia
CitySelangor
Period24/11/1426/11/14

Fingerprint

Malaysia
volatility
forecasting

Keywords

  • ARCH
  • GARCH
  • Unit trust
  • Volatility

ASJC Scopus subject areas

  • Physics and Astronomy(all)

Cite this

Ismail, N., Ismail, M. T., Karim, S. A. A., & Mohamad Hamzah, F. (2015). Modeling and forecasting the volatility of Islamic unit trust in Malaysia using GARCH model. In 22nd National Symposium on Mathematical Sciences, SKSM 2014: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia (Vol. 1682). [050009] American Institute of Physics Inc.. https://doi.org/10.1063/1.4932500

Modeling and forecasting the volatility of Islamic unit trust in Malaysia using GARCH model. / Ismail, Nuraini; Ismail, Mohd Tahir; Karim, Samsul Ariffin Abdul; Mohamad Hamzah, Firdaus.

22nd National Symposium on Mathematical Sciences, SKSM 2014: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia. Vol. 1682 American Institute of Physics Inc., 2015. 050009.

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Ismail, N, Ismail, MT, Karim, SAA & Mohamad Hamzah, F 2015, Modeling and forecasting the volatility of Islamic unit trust in Malaysia using GARCH model. in 22nd National Symposium on Mathematical Sciences, SKSM 2014: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia. vol. 1682, 050009, American Institute of Physics Inc., 22nd National Symposium on Mathematical Sciences: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia, SKSM 2014, Selangor, Malaysia, 24/11/14. https://doi.org/10.1063/1.4932500
Ismail N, Ismail MT, Karim SAA, Mohamad Hamzah F. Modeling and forecasting the volatility of Islamic unit trust in Malaysia using GARCH model. In 22nd National Symposium on Mathematical Sciences, SKSM 2014: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia. Vol. 1682. American Institute of Physics Inc. 2015. 050009 https://doi.org/10.1063/1.4932500
Ismail, Nuraini ; Ismail, Mohd Tahir ; Karim, Samsul Ariffin Abdul ; Mohamad Hamzah, Firdaus. / Modeling and forecasting the volatility of Islamic unit trust in Malaysia using GARCH model. 22nd National Symposium on Mathematical Sciences, SKSM 2014: Strengthening Research and Collaboration of Mathematical Sciences in Malaysia. Vol. 1682 American Institute of Physics Inc., 2015.
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