Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market
This study aims to re-examine the predictability of Malaysian stock returns and investigates whether the predictability can be exploited to earn abnormal returns using market timing strategy with consideration of transaction costs. Using quarterly and monthly data covering the period from January 19...
| Main Author: | |
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| Format: | Dissertation (University of Nottingham only) |
| Language: | English |
| Published: |
2011
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| Online Access: | https://eprints.nottingham.ac.uk/25491/ |
| _version_ | 1848792991426150400 |
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| author | Nguyen, Thi Tuyet Nhung |
| author_facet | Nguyen, Thi Tuyet Nhung |
| author_sort | Nguyen, Thi Tuyet Nhung |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | This study aims to re-examine the predictability of Malaysian stock returns and investigates whether the predictability can be exploited to earn abnormal returns using market timing strategy with consideration of transaction costs. Using quarterly and monthly data covering the period from January 1987 to December 2010, the regression results shows that KLCI excess returns are statistically related to change in lending interest rate, exchange rate, money supply and industrial production index. Recursive predictions derived from the optimal regression models are only capable of correctly predicting the positive signs of actual excess returns, whereas the forecasting accuracy of actual negative returns is very low, especially under quarterly trading basis. The results also indicate that the market timing strategy constructed on the basis of the recursive predictions only dominate the naïve buy-and-hold strategy in monthly trading frequencies. Particularly, under 0% and 0.8% transaction costs scenarios, the strategy provides higher returns and less riskiness as compared to the benchmark. However, under 1.4% transaction costs scenario, the market timing strategy does not deliver higher average returns than buy-and-hold strategy. |
| first_indexed | 2025-11-14T18:53:12Z |
| format | Dissertation (University of Nottingham only) |
| id | nottingham-25491 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T18:53:12Z |
| publishDate | 2011 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-254912018-02-15T20:27:29Z https://eprints.nottingham.ac.uk/25491/ Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market Nguyen, Thi Tuyet Nhung This study aims to re-examine the predictability of Malaysian stock returns and investigates whether the predictability can be exploited to earn abnormal returns using market timing strategy with consideration of transaction costs. Using quarterly and monthly data covering the period from January 1987 to December 2010, the regression results shows that KLCI excess returns are statistically related to change in lending interest rate, exchange rate, money supply and industrial production index. Recursive predictions derived from the optimal regression models are only capable of correctly predicting the positive signs of actual excess returns, whereas the forecasting accuracy of actual negative returns is very low, especially under quarterly trading basis. The results also indicate that the market timing strategy constructed on the basis of the recursive predictions only dominate the naïve buy-and-hold strategy in monthly trading frequencies. Particularly, under 0% and 0.8% transaction costs scenarios, the strategy provides higher returns and less riskiness as compared to the benchmark. However, under 1.4% transaction costs scenario, the market timing strategy does not deliver higher average returns than buy-and-hold strategy. 2011 Dissertation (University of Nottingham only) NonPeerReviewed application/pdf en https://eprints.nottingham.ac.uk/25491/1/NguyenThiTuyetNhung.pdf Nguyen, Thi Tuyet Nhung (2011) Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market. [Dissertation (University of Nottingham only)] (Unpublished) |
| spellingShingle | Nguyen, Thi Tuyet Nhung Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market |
| title | Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market |
| title_full | Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market |
| title_fullStr | Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market |
| title_full_unstemmed | Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market |
| title_short | Stock Returns Predictability and Market Timing Trading : Evidence from Malaysian Stock Market |
| title_sort | stock returns predictability and market timing trading : evidence from malaysian stock market |
| url | https://eprints.nottingham.ac.uk/25491/ |