Fundamental and behavioural determinants of stock return volatility in ASEAN-5 countries

Thampanya, N; Wu, J; Nasir, MA; Liu, JL

Abstract

Fundamental and behavioural factors are the two determinants of stock prices but are rarely investigated simultaneously. This paper examines the role of fundamental and behavioural factors in stock return volatility in the Association of Southeast Asian Nations-5 countries (ASEAN-5) for the period of January 1995 to December 2018 comprising three regimes (before Asian, between Asian and Global, and after Global financial crises). We find that fundamental factors play crucial roles in influencing stock market volatility in Malaysia, Thailand, and Singapore; whereas, behavioural factors affect stock market volatility more significantly than fundamental factors in Indonesia and the Philippines. We find distinctive differences across the three regimes supporting the above findings. Further our results suggest that ASEAN-5 has made encouraging progress of integration with Malaysia and Thailand being closer to Singapore in terms of economic development, corporate values, and political stability; however, Indonesia and the Philippines are much behind showing economic instability and their vulnerabilities are especially associated with the timing of the Asian and global financial crises. Our findings also suggest that monetary policies play a more important role than fiscal policies in the region and highlight a number of policy implications.

Citation

Thampanya, N., Wu, J., Nasir, M., & Liu, J. (2020). Fundamental and behavioural determinants of stock return volatility in ASEAN-5 countries. Journal of International Financial Markets, Institutions and Money, 65, 101193. https://doi.org/10.1016/j.intfin.2020.101193

• Journal Article Type: Article
• Acceptance Date: Feb 28, 2020
• Online Publication Date: Apr 12, 2020
• Publication Date: Apr 12, 2020
• Deposit Date: Jun 3, 2020
• Journal: Journal of International Financial Markets, Institutions and Money
• Print ISSN: 1042-4431
• Publisher: Elsevier
• Volume: 65
• Pages: 101193
• DOI: https://doi.org/10.1016/j.intfin.2020.101193
• Publisher URL: https://doi.org/10.1016/j.intfin.2020.101193
• Related Public URLs: http://www.journals.elsevier.com/journal-of-international-financial-markets-institutions-and-money