Changes in asset correlation in Malaysian stock market / Mardiyah Ramdan

The question of whether each asset in Malaysia stock market is integrated is an important one. Thus, this study aimed to discuss the changes in asset correlation in Malaysian stock markets focusing on each sector in Bursa Malaysia main board. The main objective of this paper is to investigate whether the asset are correlate with each other or not in four different market condition which is during bear markets, recovery, stable or booming. Furthermore, this paper also investigates regarding asset covariance, correlation and auto regression. The study analyzed published data from datastream by using monthly prices for 50 stocks beginning in year 1998 until 2007. There are 4 phases in the study which is during recession (1998-2000), recovery (2001-2002), market stability (2003-2005) and during market booming (2006-2007). The result showed that assets have a strong correlation during market recession and market stable. However, during market recovery and booming, assets tend to have weak correlation between each other. This situation occurs in covariance analysis. The results suggest that the search for a better understanding of the assets correlation between sectors must continue.