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Is Malaysian Stock Market Efficient? Evidence from Threshold Unit Root Tests

  • Qaiser Munir

    ()

    (School of Business and Economics, Universiti malaysia Sabah)

  • Kasim Mansur

    ()

    (School of Business and Economics, Universiti Malaysia Sabah)

This paper investigates the behavior of Kuala Lumpur Stock Exchange Composite Index (KLCI) for the period from 1980:1 to 2008:8 using a two-regime threshold autoregressive (TAR) model with an autoregressive unit root developed by Caner and Hansen [Threshold autoregression with a unit roots, Econometrics 69 (6) (2001) 1555-1596] which allows testing nonlinearity and nonstationarity simultaneously. Our finding indicates that the KLCI is a nonlinear series that is characterized by a unit root process, consistent with the efficient market hypothesis.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 2 ()
Pages: 1359-1370

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Handle: RePEc:ebl:ecbull:eb-09-00250
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  1. Erdem Basci & Mehmet Caner, 2005. "Are Real Exchange Rates Nonlinear or Nonstationary? Evidence from a new Threshold Unit Root Test," International Finance 0512001, EconWPA.
  2. Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, vol. 22(1), pages 3-25, October.
  3. Abhyankar, A & Copeland, L S & Wong, W, 1997. "Uncovering Nonlinear Structure in Real-Time Stock-Market Indexes: The S&P 500, the DAX, the Nikkei 225, and the FTSE-100," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 1-14, January.
  4. Abhyankar, A & Copeland, L S & Wong, W, 1995. "Nonlinear Dynamics in Real-Time Equity Market Indices: Evidence from the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(431), pages 864-80, July.
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  6. Chaudhuri, Kausik & Wu, Yangru, 2003. "Random walk versus breaking trend in stock prices: Evidence from emerging markets," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 575-592, April.
  7. Mehmet Caner & Bruce E. Hansen, 2001. "Threshold Autoregression with a Unit Root," Econometrica, Econometric Society, vol. 69(6), pages 1555-1596, November.
  8. Peter Huber, 1997. "Stock market returns in thin markets: evidence from the Vienna Stock Exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 7(5), pages 493-498.
  9. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April.
  10. Kyung-So Im & Junsoo Lee & Margie Tieslau, 2005. "Panel LM Unit-root Tests with Level Shifts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 393-419, 06.
  11. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  12. Alba, Joseph D. & Park, Donghyun, 2005. "An empirical investigation of purchasing power parity (PPP) for Turkey," Journal of Policy Modeling, Elsevier, vol. 27(8), pages 989-1000, November.
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