Research Article Open Access

Validation of Global Financial Crisis on Bursa Malaysia Stocks Market Companies via Covariance Structure

Shamshuritawati Sharif1, Suzilah Ismail1, Zurni Omar1 and Low Huey Theng1
  • 1 Universiti Utara Malaysia, Malaysia
American Journal of Applied Sciences
Volume 13 No. 11, 2016, 1091-1095

DOI: https://doi.org/10.3844/ajassp.2016.1091.1095

Submitted On: 18 May 2016 Published On: 27 October 2016

How to Cite: Sharif, S., Ismail, S., Omar, Z. & Theng, L. H. (2016). Validation of Global Financial Crisis on Bursa Malaysia Stocks Market Companies via Covariance Structure. American Journal of Applied Sciences, 13(11), 1091-1095. https://doi.org/10.3844/ajassp.2016.1091.1095

Abstract

The global financial crisis of 2007 to 2009 affects the economic development around the world. It started with US in 2007 and followed by Malaysia in 2008. The purpose of this study is to validate the impact before and beginning of the crisis on seventy seven Bursa Malaysia stocks market companies. Two data sets of 2007 and 2008 were used in testing the differences of the covariance structures by using a new test known as S* statistic that been developed for high dimensional data set such as the stock market. The test revealed that the covariance structure of 2007 and 2008 significantly different from each other. Thus, Optimal Minimum Spanning Tree (OMST), degree centrality measure and network topology were implemented in identifying the companies that contribute to the different covariance structure. The finding shows that HWAN is the most dominant for 2007 and MRES for 2008. The rise or fall (instability) of HWAN and MRES gave large impact on the stability structure of the stock market. The global financial crisis in 2008 affected HWAN but HONG seems to maintain in the network.

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Keywords

  • Covariance Test
  • Degree Centrality
  • High Dimension
  • Optimal Minimum Spanning Tree
  • Stock Market