Assessing the impact of the coronavirus pandemic and non-pharmaceutical interventions on Bursa Malaysia KLCI Index using GARCH-M (1,1) models
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DOIhttp://dx.doi.org/10.21511/imfi.21(3).2024.19
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Article InfoVolume 21 2024, Issue #3, pp. 222-236
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Creative Commons Attribution 4.0 International License
This study aims to explore the impact of coronavirus pandemic-related variables and non-pharmaceutical interventions on fluctuations in the Malaysian stock market during the period from January 7, 2020, to March 31, 2021. By employing GARCH-M (1,1) family models (GARCH-M, EGARCH-M, and PGARCH-M), the study seeks to understand the intricate dynamics of market volatility amidst the pandemic and associated interventions. The findings suggest that while past market volatility and conditional variance continue to influence current market fluctuations, their effects have diminished over time during the study period. Additionally, the EGARCH-M (1,1) model reveals a leverage effect, indicating increased market volatility following negative news compared to positive news. Interestingly, the EGARCH-M (1,1) model emerges as the optimal choice for accurately capturing data dynamics. Conversely, the PGARCH-M (1,1) model does not exhibit a statistically significant leverage effect. These insights contribute to a better understanding of market behavior during crises, informing future research and risk management strategies.
Acknowledgment
The authors are grateful to the Middle East University, Amman, Jordan, for the full financial support granted to this research paper.
- Keywords
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JEL Classification (Paper profile tab)C58, G01, G18, H12
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References60
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Tables7
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Figures1
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- Figure 1. Trends in coronavirus and the stock market in Malaysia
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- Table 1. Descriptions of the variables
- Table 2. Descriptive statistics
- Table 3. Results of unit root test
- Table 4. Findings from the GARCH-M (1,1) model estimations
- Table 5. Findings from the EGARCH-M (1,1) model estimations
- Table 6. Findings from the PGARCH-M (1,1) model estimations
- Table 7. Forecast evaluations
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