Estimating risk premium and volatility persistence in Malaysian stock market

Date
2017
Authors
Elshareif, Elgilani
Kabir, Muhammed
Journal Title
Journal ISSN
Volume Title
Publisher
Inderscience Enterprises Limited
Abstract
External shocks induced volatility, and persistence of the volatility has been examined for the Malaysian stock market using a model where risk-return trade-off has been incorporated. In the current study, the stock market index has been disaggregated into four different sub-sectors which have provided an opportunity to compare and contrast the inter-sectoral variance in response to external shocks and persistence of the effects of these shocks. The sectoral breakdown provides a deeper insight into the dynamic adjustment mechanism which is invariably masked in studies that use the aggregate data. This paper also finds that the risk premium coefficient is positive and statistically significant and thus concludes that the Malaysian stock return is influenced by conditional variance. More precise estimation of volatility is a pre-requisite for designing policy measures to smooth out fluctuations in stock indices, and consequently encouraging investment not only in the stock market but also in the real economy has far reaching consequences. The results have significance also for portfolio managers and investors who are managing funds to optimise risk-adjusted returns.
Description
This article is not available at CUD collection. The version of scholarly record of this article is published in International Journal of Accounting and Finance (2017), available online at: https://doi.org/10.1504/IJAF.2017.083926
Keywords
volatility persistence , risk premium , EGARCH-M , ICSS algorithm
Citation
Elshareif, E., & Kabir, M. (2017). Estimating risk premium and volatility persistence in Malaysian stock market. International Journal of Accounting and Finance, 7(1), 1-10. https://doi.org/10.1504/IJAF.2017.083926
URI
https://doi.org/10.1504/IJAF.2017.083926
 http://hdl.handle.net/20.500.12519/264
DOI
Collections
Finance