Return and volatility spillovers between the US, Japanese and Malaysian stock markets

Lida Nikmanesh, Abu Hassan Shaari Md Nor, Tamat Sarmidi, Hawati Janor

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

The present study investigates the return and volatility spillover between the stock markets of the US, Japan and Malaysia using weekly data concerning the S&P 500, NIKKEI 225 and KLCI composite indices from January 1990 to May 2013. Employing a cross-correlation function method, the results show that a unidirectional causality-in-mean exists from the stock markets of the US and Japan to the Malaysian stock market. Malaysian stock returns immediately react to the shocks received from the stock markets of the US and Japan and the reaction continues for 12 weeks. The causality-invariance test shows that the volatility of the Malaysian stock market is more affected by the US stock market than the Japanese stock market. Similarly, the variance-causality test shows that the speed of variance spillover from the US stock market to the Malaysian stock market is high; and is significant from the first week. The results from the present study are relevant for fund managers and investors when making investment decisions that involve the consideration of risk and return elements; for policy makers to monitor the financial market stability; and for hedgers to forecast risk and develop hedging strategies.

Original languageEnglish
Pages (from-to)101-111
Number of pages11
JournalJurnal Pengurusan
Volume41
Publication statusPublished - 1 Sep 2014

Fingerprint

Volatility spillover
Stock market
Japan
Causality
Financial markets
Composite index
Politicians
Japanese stock market
Stock returns
Causality test
Invariance
Hedging strategies
Investors
Malaysia
Investment decision-making
Risk and return
Cross-correlation
Fund managers
Spillover

Keywords

  • Causality in mean
  • Causality in variance
  • Spillovers
  • Stock market volatility
  • Structural break in variance

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Accounting
  • Business and International Management

Cite this

Return and volatility spillovers between the US, Japanese and Malaysian stock markets. / Nikmanesh, Lida; Md Nor, Abu Hassan Shaari; Sarmidi, Tamat; Janor, Hawati.

In: Jurnal Pengurusan, Vol. 41, 01.09.2014, p. 101-111.

Research output: Contribution to journalArticle

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