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Trend of Risk Components among Malaysian Stocks:Evidence from 2008 to 2014

Author

Listed:
  • Noor Azuddin Yakob
  • Stennylaus Duliman
  • Carl B. McGowan Jr.

Abstract

This study examines the nature of risk among Malaysian stocks from January 2008 to July 2014. The paper applies the concept of risk decomposition as stipulated by the single index model (SIM) in which the total risk is partitioned into two main components, i.e. systematic and unsystematic risks. Forty-five companies were randomly selected as the sample for this study. The results show that the unsystematic risk is greater than the systematic risk for all three different time periods used in the study. The level of both types of risk changed over the two sub-periods. The portion of systematic risk has decreased and the unsystematic risk component has increased considerably. This suggests the need for analysts and investors to focus on the company-specific factors when evaluating the risk associated with Malaysian stocks given the greater influence that the unsystematic risk has on total risk.

Suggested Citation

  • Noor Azuddin Yakob & Stennylaus Duliman & Carl B. McGowan Jr., 2016. "Trend of Risk Components among Malaysian Stocks:Evidence from 2008 to 2014," Applied Economics and Finance, Redfame publishing, vol. 3(1), pages 64-70, February.
    • Handle: RePEc:rfa:aefjnl:v:3:y:2016:i:1:p:64-70
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    More about this item

    Keywords

    Single Index Model; Systematic Risk; Unsystematic Risk; Bursa Malaysia;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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