Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits?

Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits?

Financial market activities increase during high sentiment in Malaysia. Overly optimistic behavior is one of the reasons behind the escalation which influences flows of deposit to commercial banks. This study discusses the influence of investor sentiment on bank deposits and investigates any pote...

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Main Authors: Fauzias Mat Nor, Mamunur Rashid, Izani Ibrahim, Bai Vunyi
Format: Article
Language:English
Published: Penerbit Universiti Kebangsaan Malaysia 2014
Online Access:http://journalarticle.ukm.my/7806/
http://journalarticle.ukm.my/7806/
http://journalarticle.ukm.my/7806/1/00000005.PDF
id ukm-7806
recordtype eprints
spelling ukm-78062016-12-14T06:45:15Z http://journalarticle.ukm.my/7806/ Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits? Fauzias Mat Nor, Mamunur Rashid, Izani Ibrahim, Bai Vunyi, Financial market activities increase during high sentiment in Malaysia. Overly optimistic behavior is one of the reasons behind the escalation which influences flows of deposit to commercial banks. This study discusses the influence of investor sentiment on bank deposits and investigates any potential causal relationships among deposits, sentiment and other fundamental variables. An investor sentiment index is constructed using two - attitude based sentiment proxies, namely consumer sentiment index and business condition index, the Bursa Malaysia stock market turnover, and the ASEAN ITSE composite index. The VECM test found the sentiment index to positively influence deposit flows in banks in Malaysia in the long run. Partial short run significance was revealed from the first lag of sentiment proxies, which was positive as well. Among other variables, output (GOP), money supply and interest rate showed a positive long-run relationship on bank deposits whereas currency did have a negative impact on deposits. Output (GDP), money supply and sentiment Granger caused bank deposits, whereas deposits and interest rate showed bi-directional causal relationships. The study lends support to the argumentthat higher sentiment increases stock and bank market activities primarily when the financial market is bank dependent. Bi-directional causal relationships signifythat the conventional demand-supply mechanism is active in pricing deposits. Banks set higher interest rates to attract large amounts of deposits during a low sentiment period and vice versa. Similarly, banks can offer a low interest rate on deposits during a high sentiment period assuming that deposits will automatically flow though the banking channel in a bank-dependent financial market. This argument connotes the presence of timing effect in deposit pricing within the bank financial market. Penerbit Universiti Kebangsaan Malaysia 2014 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/7806/1/00000005.PDF Fauzias Mat Nor, and Mamunur Rashid, and Izani Ibrahim, and Bai Vunyi, (2014) Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits? Journal of Finance & Financial Services, 1 (1). pp. 71-84. ISSN 2289-6597 http://www.ukm.my/gsbukm/
repository_type Digital Repository
institution_category Local University
institution Universiti Kebangasaan Malaysia
building UKM Institutional Repository
collection Online Access
language English
description Financial market activities increase during high sentiment in Malaysia. Overly optimistic behavior is one of the reasons behind the escalation which influences flows of deposit to commercial banks. This study discusses the influence of investor sentiment on bank deposits and investigates any potential causal relationships among deposits, sentiment and other fundamental variables. An investor sentiment index is constructed using two - attitude based sentiment proxies, namely consumer sentiment index and business condition index, the Bursa Malaysia stock market turnover, and the ASEAN ITSE composite index. The VECM test found the sentiment index to positively influence deposit flows in banks in Malaysia in the long run. Partial short run significance was revealed from the first lag of sentiment proxies, which was positive as well. Among other variables, output (GOP), money supply and interest rate showed a positive long-run relationship on bank deposits whereas currency did have a negative impact on deposits. Output (GDP), money supply and sentiment Granger caused bank deposits, whereas deposits and interest rate showed bi-directional causal relationships. The study lends support to the argumentthat higher sentiment increases stock and bank market activities primarily when the financial market is bank dependent. Bi-directional causal relationships signifythat the conventional demand-supply mechanism is active in pricing deposits. Banks set higher interest rates to attract large amounts of deposits during a low sentiment period and vice versa. Similarly, banks can offer a low interest rate on deposits during a high sentiment period assuming that deposits will automatically flow though the banking channel in a bank-dependent financial market. This argument connotes the presence of timing effect in deposit pricing within the bank financial market.
format Article
author Fauzias Mat Nor,
Mamunur Rashid,
Izani Ibrahim,
Bai Vunyi,
spellingShingle Fauzias Mat Nor,
Mamunur Rashid,
Izani Ibrahim,
Bai Vunyi,
Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits?
author_facet Fauzias Mat Nor,
Mamunur Rashid,
Izani Ibrahim,
Bai Vunyi,
author_sort Fauzias Mat Nor,
title Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits?
title_short Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits?
title_full Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits?
title_fullStr Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits?
title_full_unstemmed Investor sentiment and bank deposits in Malaysia: do bank managers Time the Market while pricing deposits?
title_sort investor sentiment and bank deposits in malaysia: do bank managers time the market while pricing deposits?
publisher Penerbit Universiti Kebangsaan Malaysia
publishDate 2014
url http://journalarticle.ukm.my/7806/
http://journalarticle.ukm.my/7806/
http://journalarticle.ukm.my/7806/1/00000005.PDF
first_indexed 2023-09-18T19:50:39Z
last_indexed 2023-09-18T19:50:39Z
_version_ 1777406197078425600

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