Study on behavior of stock market volatility in perspective of Malaysia
xvii Stock Market Volatility in Malaysia vi CHAPTER 1 RESEARCH OVERVIEW 1 1.0 Introduction 1 1.1 Background of Study 1 1.2 Problem Statement 3 1.3 Research Objective 4 1.3.1 General Objective 4 1.3.2 Specific Objective 5 1.4 Research Question 5 1.5 Hypotheses of Research 6 1.6 Significant of Study 7 1.7 Chapter Layout 8 1.8 Conclusion 9 CHAPTER 2 LITERATURE REVIEW 4 2.0 Introduction 10 2.1 Review of Literature 10 2.1.1 Stock Market Variability 11 2.1.2 Inflation Rate of Malaysia as a Determinant of Stock Price Volatility 12 2.1.3 Exchange Rate Determinant of Stock Price 14 2.1.4 Foreign Direct Investment of Stock Price Variability 17 2.1.5 Money Supply 18 2.1.6 Asian Financial Crisis 20 2.2 Review of Relevant Theoretical Model 21 2.2.1 Stock Return 21 Stock Market Volatility in Malaysia vii 2.2.1.1 Efficient Market Hypothesis (EMH) 21 2.2.1.2 Capital Asset Pricing Model (CAPM) 21 2.2.1.3 Random Walk Theory 22 2.2.2 Inflation Rate 23 2.2.2.1 Fisher Effect Theory 23 2.2.3 Exchange Rate 23 2.2.3.1 Markowitz"s Portfolio Theory 23 2.2.4 Foreign Direct Investment 24 2.2.5 Money Supply 24 2.2.5.1 Real Activity Theory 24 2.3 Proposed Theoretical Conceptual Framework 25 2.4 Hypotheses Development 26 2.5 Conclusion 30 CHAPTER 3 METHODOLOGY 31 3.0 Introduction 31 3.1 Research Design 31 3.2 Data Collection 31 3.2.1 Secondary Data 32 3.3 Data Processing 33 3.4 Methodology 34 3.4.1 Unit Root Test 34 3.4.2 Ordinary Least Square (OLS) 35 3.4.2.1 Multicollinearity 35 3.4.2.2 Heteroscedasticity 36 3.4.2.3 ARCH Test 36 Stock Market Volatility in Malaysia viii 3.4.2.4 Autocorrelation 37 3.4.2.5 Durbin Watson Test 37 3.4.3 Granger Causality Test 38 3.5 Conclusion 39 CHAPTER 4 Data Analysis 40 4.0 Introduction 40 4.1 Descriptive Statistic 40 4.2 Unit Root Test 43 4.3 Model Specification 43 4.3.1 Normality Test 43 4.3.2 Ramsey RESET Test 44 4.4 Description of the Empirical Model 44 4.4.1 Empirical Result Interpretations 47 4.5 Diagnostic Testing 48 4.5.1 Multicollinearity 48 4.5.2 Heteroscedasticity (ARCH Test) 49 4.5.3 Autocorrelation 50 4.6 Granger Causality Test 52 4.7 Conclusion 53 CHAPTER 5 DISCUSSION, CONCLUSION AND IMPLICATIONS 54 5.0 Introduction 54 5.1 Summary on Statistical Analyses 54 5.2 Discussions of Major Findings 56 5.3 Implication of the Study 57 Stock Market Volatility in Malaysia ix 5.4 Limitations of the Study 59 5.5 Recommendations for Future Research 61 5.6 Conclusion 62 References 65 Appendices 78 Stock Market Volatility in Malaysia