The Effects of Interest Rates Volatility on Stock Market Returns in Malaysia and Singapore | Zendy

K.P. Tan | Zendy; Mohamed Hisham Yahya | Zendy; A.N. Bany Ariffin | Zendy

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The Effects of Interest Rates Volatility on Stock Market Returns in Malaysia and Singapore

Author(s) -

K.P. Tan,

Mohamed Hisham Yahya,

A.N. Bany Ariffin

Publication year - 2012

Publication title -

international journal of management studies

Language(s) - English

Resource type - Journals

eISSN - 2232-1608

pISSN - 2180-2467

DOI - 10.32890/ijms.19.1.2012.10359

Subject(s) - volatility (finance) , economics , stock market , autoregressive conditional heteroskedasticity , interest rate , financial economics , stock market index , kuala lumpur , stock (firearms) , composite index , monetary economics , econometrics , business , geography , composite indicator , context (archaeology) , archaeology , marketing

This research examines the eff ects of interest rates volatility on stock market returns in Malaysia and Singapore. The data used are market returns on the FBM Kuala Lumpur Composite Index (FBM KLCI) and 3-months deposit yields in Malaysia over the period of September 1999 to December 2010. For the Singaporean market, the monthly data of market returns on the Straits Times Index (STI) and 3-months deposit yields in Singapore during the same period are used. Two separate GARCH (1,1) models are applied for Malaysia and Singapore. Results suggest that interest rate volatility in each country has a strong positive relationship with its respective stock market volatility. The results also show that the volatility of interest rates has a negative relationship with the stock market return but the relationship is insignificant. Keywords: Interest rates, stock market, GARCH, Malaysia, Singapore, FBM KLCI, STI.

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