Cointegration and causality between Covid-19 pandemic and Malaysian stock market returns: A sequential explanatory mixed methods study

Wong, Yin Theng (2025) Cointegration and causality between Covid-19 pandemic and Malaysian stock market returns: A sequential explanatory mixed methods study. Master dissertation/thesis, UTAR.

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Abstract

The outbreak of the COVID-19 pandemic caused significant volatility in global financial markets, with Malaysia’s FTSE Bursa Malaysia KLCI index particularly affected by pandemic-related factors. This study examines the longterm cointegration and causal relationships between the COVID-19 pandemic and KLCI stock return. Specifically, it investigates the role of COVID-19 daily infected cases, recovery cases, death cases, investor sentiment, and government policies. Guided by the Black Swan Theory, this study addresses the gap in existing literature, which has largely focused on short-term effects, by exploring the long-run relationship through a sequential explanatory mixed-methods design. The outbreak of the COVID-19 pandemic caused significant volatility in global financial markets, with Malaysia’s FTSE Bursa Malaysia KLCI index particularly affected by pandemic-related factors. This study examines the longterm cointegration and causal relationships between the COVID-19 pandemic and KLCI stock return. Specifically, it investigates the role of COVID-19 daily infected cases, recovery cases, death cases, investor sentiment, and government policies. Guided by the Black Swan Theory, this study addresses the gap in existing literature, which has largely focused on short-term effects, by exploring ii the long-run relationship through a sequential explanatory mixed-methods design. This study is novel in being the first to integrate ARDL analysis with qualitative investor insights in the Malaysian context, offering clear evidence of how the COVID-19 pandemic and the stock market are connected. By bringing together both numerical data and real investor experiences, the research contributes new knowledge on how investor behaviour and government actions influence financial market performance during crises. The findings suggest that timely government policies, such as fiscal support and monetary measures, are crucial for boosting investor confidence and reducing risks in times of unexpected, high-impact events. Keywords: COVID-19, Investor Sentiment, Government Policy, Stock Return, Malaysia Subject Area: HG4501-6051 Investment, capital formation, speculation

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