The effect of COVID-19 outbreak towards stock market in Malaysia and Singapore: how to minimize the risk using mean-variance model / Ezza Natasha Norashaid, Fathin Syahida Abdullah and Siti Nurhamizah Na’im

This study utilizes a mean-variance model to measure the volatility of the Malaysian and Singaporean stock markets both before and after the pandemic. In this study, we construct portfolios to obtain the minimum risk measures using the mean-variance model between the stock market in Malaysia and Singapore at various levels of the prescribed return. One of the most well-known models for assessing the expected return and risk minimization is the mean variance model. Variance was the first indicator applied in the mean-risk model which is the most often utilized indicator of portfolio selection. The main problem in this study is how to collect the weekly scenario returns of the top 30 companies in Bursa Malaysia and Singapore Exchange. Beside of that, the objectives of the study are to collect the scenario (weekly) return of the top 30 assets that we have selected in each of Bursa Malaysia and Singapore Exchange. Next to construct the variance minimising portfolios of the top 30 assets for both exchanges (on various risk-and-return trade-offs) by using the mean-variance optimisation model. Lastly, to compare and analyse the risk (in terms of variance) behavioural patterns of the portfolios obtained in second objectives for both before covid-19 and during covid-19. This study focuses on the effect of Covid- 19 outbreak on the stock market in Malaysia and Singapore and how to minimize the risk using the mean-variance model. We collect the data from Bursa Malaysia and Singapore Exchange to be used in this selection model which is the weekly returns of adjusted close price assets. A total of 417 scenarios before the pandemic and 156 scenarios during the pandemic. The step of this constructing risk minimizing portfolio by using this model are started by collecting the adjusted close price of 30 assets from Malaysia and Singapore. Next, to simulate weekly return and variance by Excel. After that, constructing the risk minimizing portfolio – mean-variance model. Lastly, compare the performance and risk behaviours between two countries. As for results, KLCI shows a stable performance before and after Covid-19 compared to STI in terms of variance and expected return because the risk is lower. This study also shows that Covid-19 pandemic is really impacting the stock market for both indexes in terms of variance because there is significant increase in risk (variance) after Covid-19.