Connectedness analysis of price return index among Malaysian economic sectors

Abstract

Purpose This study aims to explore the connectedness of price return index spillovers across eight economic sectors in the Malaysian stock market (Bursa Malaysia). Design/methodology/approach The analysis uses daily data of sectoral price index from 10 May 2005 to 24 February 2021. The study uses Bayesian time-varying parameter vector autoregressive. Findings The degree of price return index spillovers varies over time, reaching unprecedented heights during the COVID-19 pandemic in 2020. The industrial economic sector is the main transmitter of price index return shock, whereas the utilities economic sector is the dominant receiver of index return spillovers. Originality/value The findings are critical for investors, market participants, businesses and policymakers in developing action plans for the vulnerable sectors. It further enhances investors’ confidence in making investment decisions.