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Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia

Purpose – The purpose of this paper is to examine the long memory property of equity returns and volatility of emerging equity market by focusing on the Malaysian equity market, namely the Kuala Lumpur Stock Exchange (KLSE). Design/methodology/approach – The study adopts the Fractionally Integrat...

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Main Authors:	Abdul Manap, Turkhan Ali, Kassim, Salina
Format:	Article
Language:	English
Published:	Emerald Group Publishing Limited 2011
Subjects:	HB131 Methodology.Mathematical economics. Quantitative methods HG4501 Stocks, investment, speculation
Online Access:	http://irep.iium.edu.my/8622/1/Long_memory_published_edition.pdf http://irep.iium.edu.my/8622/ http://www.emeraldinsight.com
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spelling	my.iium.irep.86222012-01-18T04:16:11Z http://irep.iium.edu.my/8622/ Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia Abdul Manap, Turkhan Ali Kassim, Salina HB131 Methodology.Mathematical economics. Quantitative methods HG4501 Stocks, investment, speculation Purpose – The purpose of this paper is to examine the long memory property of equity returns and volatility of emerging equity market by focusing on the Malaysian equity market, namely the Kuala Lumpur Stock Exchange (KLSE). Design/methodology/approach – The study adopts the Fractionally Integrated GARCH (FIGARCH) model and Fractionally Integrated Asymmetric Power ARCH (FIAPARCH), focusing on the Malaysian data covering the period from April 15, 2004 to April 30, 2007. Findings – The study finds evidence of long memory property as well as asymmetric effects in the volatility of the KLSE. The traditional ARCH/GARCH is shown to be insufficient in modeling the volatility persistence. The FIAPARCH specification outperforms the FIGARCH model by capturing both asymmetry effects and long memory in the conditional variance. Research limitations/implications – The results of this study have practical implications for the investors intending to invest in the emerging markets such as Malaysia. Understanding volatility and developing the appropriate models are important since volatility can be a measure of risk which is highly relevant in forecasting the conditional volatility of returns for portfolio selection, asset pricing, and value at risk, option pricing and hedging strategies. Originality/value – This study contributes in providing the empirical evidence on the long memory property of equity returns and volatility of an emerging equity market with reliable estimation models, which is currently lacking, particularly for emerging markets. Emerald Group Publishing Limited 2011 Article REM application/pdf en http://irep.iium.edu.my/8622/1/Long_memory_published_edition.pdf Abdul Manap, Turkhan Ali and Kassim, Salina (2011) Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia. The Journal of Risk Finance, 12 (5). pp. 356-370. ISSN 1526-5943 http://www.emeraldinsight.com DOI: 10.1108/15265941111176109
institution	Universiti Islam Antarabangsa Malaysia
building	IIUM Library
collection	Institutional Repository
continent	Asia
country	Malaysia
content_provider	International Islamic University Malaysia
content_source	IIUM Repository (IREP)
url_provider	http://irep.iium.edu.my/
language	English
topic	HB131 Methodology.Mathematical economics. Quantitative methods HG4501 Stocks, investment, speculation
spellingShingle	HB131 Methodology.Mathematical economics. Quantitative methods HG4501 Stocks, investment, speculation Abdul Manap, Turkhan Ali Kassim, Salina Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia
description	Purpose – The purpose of this paper is to examine the long memory property of equity returns and volatility of emerging equity market by focusing on the Malaysian equity market, namely the Kuala Lumpur Stock Exchange (KLSE). Design/methodology/approach – The study adopts the Fractionally Integrated GARCH (FIGARCH) model and Fractionally Integrated Asymmetric Power ARCH (FIAPARCH), focusing on the Malaysian data covering the period from April 15, 2004 to April 30, 2007. Findings – The study finds evidence of long memory property as well as asymmetric effects in the volatility of the KLSE. The traditional ARCH/GARCH is shown to be insufficient in modeling the volatility persistence. The FIAPARCH specification outperforms the FIGARCH model by capturing both asymmetry effects and long memory in the conditional variance. Research limitations/implications – The results of this study have practical implications for the investors intending to invest in the emerging markets such as Malaysia. Understanding volatility and developing the appropriate models are important since volatility can be a measure of risk which is highly relevant in forecasting the conditional volatility of returns for portfolio selection, asset pricing, and value at risk, option pricing and hedging strategies. Originality/value – This study contributes in providing the empirical evidence on the long memory property of equity returns and volatility of an emerging equity market with reliable estimation models, which is currently lacking, particularly for emerging markets.
format	Article
author	Abdul Manap, Turkhan Ali Kassim, Salina
author_facet	Abdul Manap, Turkhan Ali Kassim, Salina
author_sort	Abdul Manap, Turkhan Ali
title	Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia
title_short	Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia
title_full	Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia
title_fullStr	Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia
title_full_unstemmed	Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia
title_sort	long memory properties and asymmetric effects of emerging equity market: evidence from malaysia
publisher	Emerald Group Publishing Limited
publishDate	2011
url	http://irep.iium.edu.my/8622/1/Long_memory_published_edition.pdf http://irep.iium.edu.my/8622/ http://www.emeraldinsight.com
_version_	1643606163185467392
score	13.211869

Long memory properties and asymmetric effects of emerging equity market: evidence from Malaysia

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