Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.

The growing trend of interdependence between the international stock markets indicated the amalgamation of risk across borders that plays a significant role in portfolio diversification by selecting different assets from the financial markets and is also helpful for making extensive economic policy...

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Main Authors: Xiaoyang Wang, Hui Guo, Muhammad Waris, Badariah Haji Din
Format: Article
Language:English
Published: Public Library of Science (PLoS) 2024-01-01
Series:PLoS ONE
Online Access:https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0296712&type=printable
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author Xiaoyang Wang
Hui Guo
Muhammad Waris
Badariah Haji Din
author_facet Xiaoyang Wang
Hui Guo
Muhammad Waris
Badariah Haji Din
author_sort Xiaoyang Wang
collection DOAJ
description The growing trend of interdependence between the international stock markets indicated the amalgamation of risk across borders that plays a significant role in portfolio diversification by selecting different assets from the financial markets and is also helpful for making extensive economic policy for the economies. By applying different methodologies, this study undertakes the volatility analysis of the emerging and OECD economies and analyzes the co-movement pattern between them. Moreover, with that motive, using the wavelet approach, we provide strong evidence of the short and long-run risk transfer over different time domains from Malaysia to its trading partners. Our findings show that during the Asian financial crisis (1997-98), Malaysia had short- and long-term relationships with China, Germany, Japan, Singapore, the UK, and Indonesia due to both high and low-frequency domains. Meanwhile, after the Global financial crisis (2008-09), it is being observed that Malaysia has long-term and short-term synchronization with emerging (China, India, Indonesia), OECD (Germany, France, USA, UK, Japan, Singapore) stock markets but Pakistan has the low level of co-movement with Malaysian stock market during the global financial crisis (2008-09). Moreover, it is being seen that Malaysia has short-term at both high and low-frequency co-movement with all the emerging and OECD economies except Japan, Singapore, and Indonesia during the COVID-19 period (2020-21). Japan, Singapore, and Indonesia have long-term synchronization relationships with the Malaysian stock market at high and low frequencies during COVID-19. While in a leading-lagging relationship, Malaysia's stock market risk has both leading and lagging behavior with its trading partners' stock market risk in the selected period; this behavior changes based on the different trade and investment flow factors. Moreover, DCC-GARCH findings shows that Malaysian market has both short term and long-term synchronization with trading partners except USA. Conspicuously, the integration pattern seems that the cooperation development between stock markets matters rather than the regional proximity in driving the cointegration. The study findings have significant implications for investors, governments, and policymakers around the globe.
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spelling doaj.art-f7a0722a980f4b6da0802b29b6ddcb452024-02-06T05:30:58ZengPublic Library of Science (PLoS)PLoS ONE1932-62032024-01-01191e029671210.1371/journal.pone.0296712Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.Xiaoyang WangHui GuoMuhammad WarisBadariah Haji DinThe growing trend of interdependence between the international stock markets indicated the amalgamation of risk across borders that plays a significant role in portfolio diversification by selecting different assets from the financial markets and is also helpful for making extensive economic policy for the economies. By applying different methodologies, this study undertakes the volatility analysis of the emerging and OECD economies and analyzes the co-movement pattern between them. Moreover, with that motive, using the wavelet approach, we provide strong evidence of the short and long-run risk transfer over different time domains from Malaysia to its trading partners. Our findings show that during the Asian financial crisis (1997-98), Malaysia had short- and long-term relationships with China, Germany, Japan, Singapore, the UK, and Indonesia due to both high and low-frequency domains. Meanwhile, after the Global financial crisis (2008-09), it is being observed that Malaysia has long-term and short-term synchronization with emerging (China, India, Indonesia), OECD (Germany, France, USA, UK, Japan, Singapore) stock markets but Pakistan has the low level of co-movement with Malaysian stock market during the global financial crisis (2008-09). Moreover, it is being seen that Malaysia has short-term at both high and low-frequency co-movement with all the emerging and OECD economies except Japan, Singapore, and Indonesia during the COVID-19 period (2020-21). Japan, Singapore, and Indonesia have long-term synchronization relationships with the Malaysian stock market at high and low frequencies during COVID-19. While in a leading-lagging relationship, Malaysia's stock market risk has both leading and lagging behavior with its trading partners' stock market risk in the selected period; this behavior changes based on the different trade and investment flow factors. Moreover, DCC-GARCH findings shows that Malaysian market has both short term and long-term synchronization with trading partners except USA. Conspicuously, the integration pattern seems that the cooperation development between stock markets matters rather than the regional proximity in driving the cointegration. The study findings have significant implications for investors, governments, and policymakers around the globe.https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0296712&type=printable
spellingShingle Xiaoyang Wang
Hui Guo
Muhammad Waris
Badariah Haji Din
Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.
PLoS ONE
title Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.
title_full Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.
title_fullStr Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.
title_full_unstemmed Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.
title_short Risk and causality Co-movement of Malaysia's stock market with its emerging and OECD trading partners. Evidence from the wavelet approach.
title_sort risk and causality co movement of malaysia s stock market with its emerging and oecd trading partners evidence from the wavelet approach
url https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0296712&type=printable
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