Rusmita, Sylva Alif and Rani, Lina Nugraha and Swastika, Putri and Zulaikha, Siti (2020) Capital Market Volatility MGARCH Analysis: Evidence from Southeast Asia. Journal of Asian Finance, Economics and Business, 7 (11). pp. 117-126. ISSN 2288-4637

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Abstract

This paper is aimed to explore the co-movement capital market in Southeast Asia and analysis the correlation of conventional and Islamic Index in the regional and global equity. This research become necessary to represent the risk on the capital market and measure market performance, as investor considers the volatility before investing. The time series daily data use from April 2012 to April 2020 both conventional and Islamic stock index in Malaysia and Indonesia. This paper examines the dynamics of conditional volatilities and correlations between those markets by using Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH). Our result shows that conventional or composite index in Malaysia less volatile than Islamic, but on the other hand, both drive correlation movement. The other output captures that Islamic Index in Indonesian capital market more gradual volatilities than the Composite Index that tends to be low in risk so that investors intend to keep the shares. Generally, the result shows a correlation in each country for conventional and the Islamic index. However, Internationally Indonesia and Malaysia composite and Islamic is low correlated. Regionally Indonesia’s indices movement looks to be more correlated and it’s similar to Malaysian Capital Market counterparts. In the global market distress condition, the diversification portfolio between Indonesia and Malaysia does not give many benefits. Keywords: Financial Times Stock Exchange, Hijra Index, Jakarta Composite Index, Jakarta Islamic Index, Volatility Index

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