The impact of GST implementation on the Malaysian stock market index volatility: an empirical approach
Purpose – The purpose of this paper is to examine the impact of the Goods and Service Tax (GST) implementation on Malaysian stock market index. Design/methodology/approach – This study used daily closing prices of the Malaysian stock index and futures markets for the period ranging from June 2009...
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| Format: | Article |
| Language: | English |
| Published: |
Emerald Publishing Limited
2018
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/68236/ http://irep.iium.edu.my/68236/ http://irep.iium.edu.my/68236/ http://irep.iium.edu.my/68236/1/68236%29_The%20impact%20of%20GST%20implementation%20on%20the%20Malaysian.pdf |
| Summary: | Purpose – The purpose of this paper is to examine the impact of the Goods and Service Tax (GST)
implementation on Malaysian stock market index.
Design/methodology/approach – This study used daily closing prices of the Malaysian stock index and
futures markets for the period ranging from June 2009 to November 2016. Empirical estimation is based on the
generalised autoregressive conditional heteroscedasticity (1, 1)model for pre- and post-announcement of the GST.
Findings – Result shows that volatility of Malaysian stock market index increases in the post-announcement
than in the pre-announcement of the GST which indicates that educative programs employed by the
government before the GST announcement did not yield meaningful result. The volatility of the Malaysian
stock market index is persistent during the GST announcement and highly persistent after the
implementation. Noticeable increase in post-announcement is in support with the expectation of the market
about GST policy in Malaysia.
Practical implications – The finding of this study is consistent with expectation of the market that GST
policy will increase the price of the goods and services and might reduce standard of living. This is supported
by a noticeable increase in the volatility of the Malaysian stock market index in the post-announcement of
GST which is empirically shown during the announcement and after the implementation of GST. Although
the GST announcement could be classified as a scheduled announcement, unwillingness to accept the policy
prevails in the market as shown by the increase in the market volatility.
Originality/value – Past studies on Malaysian stock market index volatility focus on the impact of Asian
and global financial crisis whereas this study examines the impact of the GST announcement and
implementation on the volatility of the Malaysian stock market index. |
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