| Summary: | The study assesses the impact of the 2007 US sub-prime crisis on the
Malaysian stock market by analysing both the benchmark and sectoral indices.
Specifically, it empirically examines the integration of the Malaysian, US and
Japanese stock markets at the sectoral level, such as finance, manufacturing,
property, industrial products and consumer products in the periods before and
during the 2007 sub-prime crisis (September 2006 to May 2009). By adopting
the co-integration and vector autoregressions (VAR) methods, the study
documents that the nature of integration of the three markets changes due to the
crisis. While there are diversification benefits in these markets at the initial
stage of the crisis, there seems to be no diversification benefits in the stock
markets in a prolonged ‘down market’. In a short time horizon, ‘market panic’
results in investors to withdraw funds in the crisis country and invest in other
countries with calmer markets.
|
|---|