Impact of capital control measures on the Malaysian stock market |
Abstract:
Purpose – The purpose of this paper is to examine the extent to which the capital control measures
implemented by the Malaysian central bank in late 1998 had an influence on segmenting the
Malaysian equity market from other major equity markets.
Design/methodology/approach – The S&P 500, the Nikkei 225 Index, the STI Index and the KLSE
Composite Index are considered. The discrete wavelet transform technique – “Haar” is employed to
decompose the series into various time scales during the pre- and post-capital control periods in
Malaysia. The decomposed series are then used to estimate the interdependence between KLSE
Composite Index with the other three markets at various time scales.
Findings – The empirical findings support three conclusions. First, in the pre-capital control period,
Singapore is the most influential market followed by the US across all time scales in transmitting news
into Malaysia. Second, after the imposition of capital controls, the spillover effects from Singapore to
Malaysia have declined substantially, suggesting a reduced integration between these two markets.
Finally, in the post-capital control period, all three markets appear to be imparting a similar but
moderate level of influence on the Malaysian market.
Research limitations/implications – To explore the return and volatility spillovers, the use of
return and volatility series at different time scales provided a greater level of insight into the dynamics
than the standard approaches which employ only one series in the time domain.
Originality/value – The results from this paper will have potential implications for asset allocation,
the pricing of domestic securities, the implementation of global hedging and trading strategies and the
evaluation of regulatory proposals to restrict international capital flows |
| Keywords: |
Financial markets, Malaysia, Time series analysis, Capital instruments |
| Author(s): |
Mala Raghavan, Jonathan Dark and Elizabeth Ann Maharaj |
| Source: |
International Journal of Managerial Finance Vol. 6 No. 2, 2010 pp. 116-127 |
| Subject: |
مدیریت مالی |
| Category: |
مقالات ترجمه شده - دانلود ترجمه مقاله |
| Release Date: |
2010 |
| No of Pages: |
11 |
| Price(Tomans): |
0 |
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