Financial Liberalisation And Stock Market Volatility in Malaysia: A GARCH Approach

Abstract

This paper examines the contention that stock market volatility increases after market liberalisation for the case of Malaysia. Applying a GARCH model, we find evidence that contradicts this contention. Instead, the return volatility seems to decrease after the opening of the Malaysian market in 1988 to international investors. We also, tentatively, find evidence for the role of portfolio investment inflows in increasing market volatility during the post-liberalisation period.