The impact of multiple structural-breaks on Malaysian stock market

Chin Wen Cheong, Zaidi Isa

Research output: Contribution to journalArticle

Abstract

In this article, we investigate the impact of structural break on the price, return as well as volatility of Kuala Lumpur Composite Index (KLCI). We include the multiple structural-breaks to examine whether the price index is follows a random walk or mean reversion processes. A joint modified autoregressive-moving average (ARMA) and asymmetric autoregressive conditional heteroskedastic (ARCH) model are used to account the common stylized facts of return and volatility under the structural break. The unit root test with the inclusion of structural break show that the price index is characterizes by a mean-reverting process which violates the random walk process. On the other hand, the ARMA-ARCH model with structural break shows improvement in model specification, diagnostic test and significantly reduces the volatility persistence which may cause by the structural breaks.

Original languageEnglish
Pages (from-to)94-103
Number of pages10
JournalEuropean Journal of Economics, Finance and Administrative Sciences
Issue number7
Publication statusPublished - Apr 2007

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Structural breaks
Multiple structural breaks
Stock market
Autoregressive moving average
Price index
Conditional model
Random walk
Mean-reverting process
Unit root tests
Model specification
Composite index
Volatility persistence
Inclusion
Stylized facts
Diagnostic tests
Mean reversion

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Economics, Econometrics and Finance(all)

Cite this

The impact of multiple structural-breaks on Malaysian stock market. / Cheong, Chin Wen; Isa, Zaidi.

In: European Journal of Economics, Finance and Administrative Sciences, No. 7, 04.2007, p. 94-103.

Research output: Contribution to journalArticle

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