Title: Capital Market Volatility MGARCH Analysis: Evidence from Southeast Asia
Authors:
1. Sylva Alif Rusmita
2. Lina Nugraha Rani
3. Putri Swastika
4. Siti Zulaikha
Department: Islamic Economics
Journal Name: The Journal of Asian Finance, Economics and Business
Kinds of Journal: Q4
Keywords: Financial Times Stock Exchange; Hijra Index; Jakarta Composite Index; Jakarta Islamic Index; Volatility Index
ABSTRACT
This paper is aimed at exploring the co-movement capital market in Southeast Asia and analyzing the correlation of conventional and Islamic Index in the regional and global equity. This research becomes necessary to represent the risk on the capital market and measure market performance, as investors consider the volatility before investing. The time series daily data use from April 2012 to April 2020 both conventional and Islamic stock index in Malaysia and Indonesia. This paper examines the dynamics of conditional volatility and correlations between those markets by using Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH). Our results show that conventional or composite index in Malaysia is less volatile than Islamic, but on the other hand, both drive correlation movement. The other output captures that the Islamic Index in Indonesian capital market has more gradual volatility than the Composite Index which tends to be low in risk so that investors intend to keep the shares. Generally, the results show a correlation in each country for conventional and the Islamic index. However, Internationally Indonesia and Malaysia composite and Islamic are low correlated. Regionally Indonesia's index movement looks to be more correlated and it's similar to its Malaysian Capital Market counterparts. In the global market distress condition, the portfolio diversification between Indonesia and Malaysia does not provide many benefits.
For details: https://doi.org/10.13106/jafeb.2020.vol7.no11.117