Open AccessLeverage Effect and Market Efficiency of Kuala Lumpur Composite Index
Author(s) -
Wai Mun Har,
Lenan Sundaram,
Ong Sze Yin
Publication year - 2009
Publication title -
international journal of business and management
Language(s) - English
Resource type - Journals
eISSN - 1833-8119
pISSN - 1833-3850
DOI - 10.5539/ijbm.v3n4p138
Subject(s) - kuala lumpur , composite index , leverage (statistics) , econometrics , economics , stock market , stock market index , financial economics , stock (firearms) , index (typography) , monetary economics , business , statistics , composite indicator , mathematics , engineering , computer science , geography , world wide web , marketing , mechanical engineering , context (archaeology) , archaeology
Stock market is a main source for raising new private capital in many developing countries including Malaysia. Therefore, its efficiency and leverage effect is utmost important and interest. This paper aims to estimate the leverage effect of Malaysian stock market using EGARCH as well as investigating its efficiency using Augmented Dickey-Fuller (ADF). Data used consists of weekly closing prices for Malaysia stock market indices, namely the Kuala Lumpur Composite Index (KLCI), from 9 January 2004 to 8 Jun 2007. Results show that the EGARCH model did not confirm the existence of the leverage effect. The KLCI possess a unit root with no trend but with drift or known as random walk drift. It suggests that KLCI is weak form hypothesis.