Symmetric co-movement between Malaysia and Japan stock markets

Ruzanna Ab Razak, Noriszura Ismail

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

Abstract

The copula approach is a flexible tool known to capture linear, nonlinear, symmetric and asymmetric dependence between two or more random variables. It is often used as a co-movement measure between stock market returns. The information obtained from copulas such as the level of association of financial market during normal and bullish and bearish markets phases are useful for investment strategies and risk management. However, the study of co-movement between Malaysia and Japan markets are limited, especially using copulas. Hence, we aim to investigate the dependence structure between Malaysia and Japan capital markets for the period spanning from 2000 to 2012. In this study, we showed that the bivariate normal distribution is not suitable as the bivariate distribution or to present the dependence between Malaysia and Japan markets. Instead, Gaussian or normal copula was found a good fit to represent the dependence. From our findings, it can be concluded that simple distribution fitting such as bivariate normal distribution does not suit financial time series data, whose characteristics are often leptokurtic. The nature of the data is treated by ARMA-GARCH with heavy tail distributions and these can be associated with copula functions. Regarding the dependence structure between Malaysia and Japan markets, the findings suggest that both markets co-move concurrently during normal periods.

Original languageEnglish
Title of host publication4th International Conference on Mathematical Sciences - Mathematical Sciences
Subtitle of host publicationChampioning the Way in a Problem Based and Data Driven Society, ICMS 2016
PublisherAmerican Institute of Physics Inc.
Volume1830
ISBN (Electronic)9780735414983
DOIs
Publication statusPublished - 27 Apr 2017
Event4th International Conference on Mathematical Sciences - Mathematical Sciences: Championing the Way in a Problem Based and Data Driven Society, ICMS 2016 - Putrajaya, Malaysia
Duration: 15 Nov 201617 Nov 2016

Other

Other4th International Conference on Mathematical Sciences - Mathematical Sciences: Championing the Way in a Problem Based and Data Driven Society, ICMS 2016
CountryMalaysia
CityPutrajaya
Period15/11/1617/11/16

Fingerprint

Malaysia
Japan
normal density functions
risk management
autoregressive moving average
random variables

ASJC Scopus subject areas

  • Physics and Astronomy(all)

Cite this

Razak, R. A., & Ismail, N. (2017). Symmetric co-movement between Malaysia and Japan stock markets. In 4th International Conference on Mathematical Sciences - Mathematical Sciences: Championing the Way in a Problem Based and Data Driven Society, ICMS 2016 (Vol. 1830). [080011] American Institute of Physics Inc.. https://doi.org/10.1063/1.4980995

Symmetric co-movement between Malaysia and Japan stock markets. / Razak, Ruzanna Ab; Ismail, Noriszura.

4th International Conference on Mathematical Sciences - Mathematical Sciences: Championing the Way in a Problem Based and Data Driven Society, ICMS 2016. Vol. 1830 American Institute of Physics Inc., 2017. 080011.

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

Razak, RA & Ismail, N 2017, Symmetric co-movement between Malaysia and Japan stock markets. in 4th International Conference on Mathematical Sciences - Mathematical Sciences: Championing the Way in a Problem Based and Data Driven Society, ICMS 2016. vol. 1830, 080011, American Institute of Physics Inc., 4th International Conference on Mathematical Sciences - Mathematical Sciences: Championing the Way in a Problem Based and Data Driven Society, ICMS 2016, Putrajaya, Malaysia, 15/11/16. https://doi.org/10.1063/1.4980995
Razak RA, Ismail N. Symmetric co-movement between Malaysia and Japan stock markets. In 4th International Conference on Mathematical Sciences - Mathematical Sciences: Championing the Way in a Problem Based and Data Driven Society, ICMS 2016. Vol. 1830. American Institute of Physics Inc. 2017. 080011 https://doi.org/10.1063/1.4980995
Razak, Ruzanna Ab ; Ismail, Noriszura. / Symmetric co-movement between Malaysia and Japan stock markets. 4th International Conference on Mathematical Sciences - Mathematical Sciences: Championing the Way in a Problem Based and Data Driven Society, ICMS 2016. Vol. 1830 American Institute of Physics Inc., 2017.
@inproceedings{17a7b64b56f24fc7bb35beee358d5d06,
title = "Symmetric co-movement between Malaysia and Japan stock markets",
abstract = "The copula approach is a flexible tool known to capture linear, nonlinear, symmetric and asymmetric dependence between two or more random variables. It is often used as a co-movement measure between stock market returns. The information obtained from copulas such as the level of association of financial market during normal and bullish and bearish markets phases are useful for investment strategies and risk management. However, the study of co-movement between Malaysia and Japan markets are limited, especially using copulas. Hence, we aim to investigate the dependence structure between Malaysia and Japan capital markets for the period spanning from 2000 to 2012. In this study, we showed that the bivariate normal distribution is not suitable as the bivariate distribution or to present the dependence between Malaysia and Japan markets. Instead, Gaussian or normal copula was found a good fit to represent the dependence. From our findings, it can be concluded that simple distribution fitting such as bivariate normal distribution does not suit financial time series data, whose characteristics are often leptokurtic. The nature of the data is treated by ARMA-GARCH with heavy tail distributions and these can be associated with copula functions. Regarding the dependence structure between Malaysia and Japan markets, the findings suggest that both markets co-move concurrently during normal periods.",
author = "Razak, {Ruzanna Ab} and Noriszura Ismail",
year = "2017",
month = "4",
day = "27",
doi = "10.1063/1.4980995",
language = "English",
volume = "1830",
booktitle = "4th International Conference on Mathematical Sciences - Mathematical Sciences",
publisher = "American Institute of Physics Inc.",

}

TY - GEN

T1 - Symmetric co-movement between Malaysia and Japan stock markets

AU - Razak, Ruzanna Ab

AU - Ismail, Noriszura

PY - 2017/4/27

Y1 - 2017/4/27

N2 - The copula approach is a flexible tool known to capture linear, nonlinear, symmetric and asymmetric dependence between two or more random variables. It is often used as a co-movement measure between stock market returns. The information obtained from copulas such as the level of association of financial market during normal and bullish and bearish markets phases are useful for investment strategies and risk management. However, the study of co-movement between Malaysia and Japan markets are limited, especially using copulas. Hence, we aim to investigate the dependence structure between Malaysia and Japan capital markets for the period spanning from 2000 to 2012. In this study, we showed that the bivariate normal distribution is not suitable as the bivariate distribution or to present the dependence between Malaysia and Japan markets. Instead, Gaussian or normal copula was found a good fit to represent the dependence. From our findings, it can be concluded that simple distribution fitting such as bivariate normal distribution does not suit financial time series data, whose characteristics are often leptokurtic. The nature of the data is treated by ARMA-GARCH with heavy tail distributions and these can be associated with copula functions. Regarding the dependence structure between Malaysia and Japan markets, the findings suggest that both markets co-move concurrently during normal periods.

AB - The copula approach is a flexible tool known to capture linear, nonlinear, symmetric and asymmetric dependence between two or more random variables. It is often used as a co-movement measure between stock market returns. The information obtained from copulas such as the level of association of financial market during normal and bullish and bearish markets phases are useful for investment strategies and risk management. However, the study of co-movement between Malaysia and Japan markets are limited, especially using copulas. Hence, we aim to investigate the dependence structure between Malaysia and Japan capital markets for the period spanning from 2000 to 2012. In this study, we showed that the bivariate normal distribution is not suitable as the bivariate distribution or to present the dependence between Malaysia and Japan markets. Instead, Gaussian or normal copula was found a good fit to represent the dependence. From our findings, it can be concluded that simple distribution fitting such as bivariate normal distribution does not suit financial time series data, whose characteristics are often leptokurtic. The nature of the data is treated by ARMA-GARCH with heavy tail distributions and these can be associated with copula functions. Regarding the dependence structure between Malaysia and Japan markets, the findings suggest that both markets co-move concurrently during normal periods.

UR - http://www.scopus.com/inward/record.url?scp=85019480880&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85019480880&partnerID=8YFLogxK

U2 - 10.1063/1.4980995

DO - 10.1063/1.4980995

M3 - Conference contribution

VL - 1830

BT - 4th International Conference on Mathematical Sciences - Mathematical Sciences

PB - American Institute of Physics Inc.

ER -