How Covid-19 pandemic affected Malaysian stock market

Ang, Wei Yee and Chang, Yew Wen and Lee, Kar Fatt and Liang, Yi Ying and Lim, Yin Zhuo (2022) How Covid-19 pandemic affected Malaysian stock market. Final Year Project, UTAR.

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Abstract

Since the outbreak of the COVID-19 pandemic, the impact of the epidemic on global stock markets has been a hot topic for researchers to explore. Although a large number of studies have discussed this topic by using various empirical techniques, there are few studies specifically investigating the impact of the epidemic on the Malaysian stock market return. Therefore, the aim of this study is to investigate how the COVID-19 pandemic affect the Malaysian stock market by using the linear autoregressive distributed lags (ARDL) technique. This paper analyses the dependent variable, whether there is a relationship between Malaysian stock market price and independent variables, including the number of COVID-19 confirmed cases in Malaysia, Chicago Board of Options Exchange Volatility Index and Malaysian government stringency index. Furthermore, since most of the confirmed cases occurred after the election in Sabah, this study intends to use weekly data instead of daily non-stop data in order to compare the results in different periods and solve the problem of data imbalance. The first phase is from February 2, 2020, to September 27, 2020, and the second phase is from October 4, 2020 to May 30, 2021, with a total of 70 weekly observations. In addition, six diagnostic tests will be used to evaluate the adequacy of the model's dynamic specification, namely serial autocorrelation test, normality test, heteroscedasticity test, Ramsey's RESET test, CUSUM test and CUSUMSQ tests. The results confirm that the presence of co-integration relationship among all underlying variables. Nevertheless, there are still some limitations and suggestions in this study, which will be further discussed in the following chapters.

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