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A Nonlinear New Approach to Investigating Crisis: A Case from Malaysia

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  • Omay, Tolga

Abstract

In this paper, we have investigated the effects of Asia 97 crisis on Malaysian stock exchange market by using a nonlinear approach which gives a detailed analysis with respect to linear counterparts. Specifically, we are using generalized impulse response function (GIRF) in order to see the effects of crisis on stock indices. In order to employ GIRF analysis, we need further investigation on potential nonlinearities in conditional mean and variance equation for Malaysia stock market. Specifically, we use STAR-STGARCH family models for modeling daily returns of the Investable and Non-Investable Malaysia stock indices, covering the period 1995.06.30-2003.09.05. The analysis of this paper shows that individual markets of Malaysia have strongly been affected from the Asia 97 crisis. In addition, the Asia 97 crisis has increased the variability of the Malaysia stock market and affected foreign investors more than the domestic investors.

Suggested Citation

  • Omay, Tolga, 2010. "A Nonlinear New Approach to Investigating Crisis: A Case from Malaysia," MPRA Paper 20738, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:20738
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    File URL: https://mpra.ub.uni-muenchen.de/20738/1/MPRA_paper_20738.pdf
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    References listed on IDEAS

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    1. Eitrheim, Oyvind & Terasvirta, Timo, 1996. "Testing the adequacy of smooth transition autoregressive models," Journal of Econometrics, Elsevier, vol. 74(1), pages 59-75, September.
    2. Sandeep Patel & Asani Sarkar, 1998. "Stock market crises in developed and emerging markets," Research Paper 9809, Federal Reserve Bank of New York.
    3. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
    4. He, Hua & Modest, David M, 1995. "Market Frictions and Consumption-Based Asset Pricing," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 94-117, February.
    5. Mubariz Hasanov & Tolga Omay, 2008. "Nonlinearities in emerging stock markets: evidence from Europe's two largest emerging markets," Applied Economics, Taylor & Francis Journals, vol. 40(20), pages 2645-2658.
    6. Dumas, Bernard, 1992. "Dynamic Equilibrium and the Real Exchange Rate in a Spatially Separated World," Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 153-180.
    7. Mubariz Hasanov & Tolga Omay, 2007. "Are the Transition Stock Markets Efficient? Evidence from Non-Linear Unit Root Tests," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 7(2), pages 1-12.
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    Cited by:

    1. Tolga Omay, 2011. "The relationship between inflation, output growth, and their uncertainties: Nonlinear Multivariate GARCH-M evidence," Economics Bulletin, AccessEcon, vol. 31(4), pages 3006-3015.

    More about this item

    Keywords

    STAR-STGARCH; Generalized Impulse Response Function. 1997 Asia Crisis; stock markets;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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