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Malaysian stock market - Essay Example
The purpose of this study is to find out how the Malaysian stock market (Bursa Malaysia) reacts to companies' response to Kuala Lumpur Stock Exchange (KLSE) query on unusual market activity. Specifically, of interest to the study is the behaviour of the average and cumulative returns and if there are large positive abnormal volume results to an individual stock prior to and after the date of firms' explanation to the KLSE query…
Using Duncan & Etebari's (1990) method, an initial sample of five securities firms in the KLSE which posted the largest price gains for each of the 49 trading weeks of 2005 will be obtained, all of which were queried by the KLSE during the same period as well. From the price data, initial raw returns will be calculated which in turn will be used to estimate average and cumulative average returns. Conversely, a measure of 'unusual' trading volume will be obtained from the samples by still using Duncan & Etebari's method in measuring abnormal trading volume. A t-test will be applied to determine if behaviour of the average and cumulative returns and positive abnormal volume results are significantly different from zero.
Information disclosure is one of the most crucial ingredients for the effective operation of stock markets. Yang and Wu (2002) cite that the financial crisis in Southeast Asian countries that broke out in 1997 and the Enron bankruptcy case in the United States capital market in 2001 provide negative examples that teach about the importance of information on the stock market. ...