Dynamic risk attributes in Malaysia stock markets: Behavioural finance insights

This paper proposes a quasi‐rational multi‐factor stock‐pricing determinants model with fundamental (rational) and behavioural (irrational) risk factors that highlight academic and practical merits. Academically, this study provides proofs to the notion of bounded rational and dynamic risk–return relationships. Practically, ways to uncover dynamics risk attributes in equity markets are highlighted. The empirical tests are performed based on a sample of 238 Malaysian firm stock returns with monthly data spanning from 1996:01 to 2014:12. The panel regression and quantile panel regression methods are employed in estimations to uncover the dynamic risk–return relationships. Collectively, the analyses provide evidence to support the dynamic of risk attributes due to quasi‐rational risk factors and given different prospects namely; firm characteristics, market states, as well as losses and gains. In theory, the results lend support to the validity of the suggested stock‐pricing determinants model. In practice, the study provides valuable insights to capture multi‐attributes risk dynamics in stock market that will benefits practitioners for trading strategies and policymakers for market efficiency governance policymaking.