The Effects of Interest Rates Volatility on Stock Market Returns in Malaysia and Singapore

Authors

  • Karen Tan Faculty of Economics and Management Universiti Putra Malaysia, Malaysia
  • Mohamed Hisham Yahya Faculty of Economics and Management Universiti Putra Malaysia, Malaysia
  • Amin Nordin Bany Ariffin Faculty of Economics and Management Universiti Putra Malaysia, Malaysia

DOI:

https://doi.org/10.32890/ijms2012.19.1.2

Keywords:

Interest rates, stock market, GARCH, Malaysia, Singapore, FBM KLCI, STI

Abstract

This research examines the eff ects of interest rates volatility on stock market returns in Malaysia and Singapore. The data used are market returns on the FBM Kuala Lumpur Composite Index (FBM KLCI) and 3-months deposit yields in Malaysia over the period of September 1999 to December 2010. For the Singaporean market, the monthly data of market returns on the Straits Times Index (STI) and 3-months deposit yields in Singapore during the same period are used. Two separate GARCH (1,1) models are applied for Malaysia and Singapore. Results suggest that interest rate volatility in each country has a strong positive relationship with its respective stock market volatility. The results also show that the volatility of interest rates has a negative relationship with the stock market return but the relationship is insignificant.
 
Keywords: Interest rates, stock market, GARCH, Malaysia, Singapore, FBM KLCI, STI.

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Published

28-06-2012

Issue

Vol. 19 No. 1 (2012): International Journal of Management Studies (IJMS) Vol. 19, No. 1 June 2012

Section

Articles

Research impact

Harvested 2026-09-08
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Identifiers DOI 10.32890/ijms2012.19.1.2

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