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Geopolitical Uncertainties and Malaysian Stock Market Returns: Do Market Conditions Matter?

Author

Listed:
  • Mohammad Enamul Hoque

    (Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia
    BRAC Business School, BRAC University, Dhaka 1212, Bangladesh)

  • Mohd Azlan Shah Zaidi

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia)

  • M. Kabir Hassan

    (Department of Economics and Finance, University of New Orleans, New Orleans, LA 70148, USA)

Abstract

Geopolitical uncertainties have been a concern for global economies and financial markets’ participants. By employing Markov switching regression and quantile regression, we investigated the effect of global and country-specific geopolitical uncertainties on Malaysian Conventional and Islamic stock returns in different market conditions. The estimated results of the Markov switching regression show that Malaysian conventional and Islamic stocks react differently to global and country-specific geopolitical uncertainties under different market volatility conditions, implying volatility dependent exposures and reactions to global and country-specific geopolitical uncertainties. The quantile regression results also reveal that Malaysian conventional and Islamic stocks respond differently to global and country-specific geopolitical uncertainties at different market stages. The empirical findings, therefore, indicate a heterogeneous and non-linear stock reaction to geopolitical uncertainties, providing new insights into geopolitical uncertainties and stock return relationships. Hence, the results will be valuable for asset pricing and investments in an emerging market such as the Malaysian market.

Suggested Citation

  • Mohammad Enamul Hoque & Mohd Azlan Shah Zaidi & M. Kabir Hassan, 2021. "Geopolitical Uncertainties and Malaysian Stock Market Returns: Do Market Conditions Matter?," Mathematics, MDPI, vol. 9(19), pages 1-16, September.
    • Handle: RePEc:gam:jmathe:v:9:y:2021:i:19:p:2393-:d:643380
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