Abstract
Malaysia has been enjoying fixed retail prices for research octane number (RON) 95 petrol and diesel as a form of subsidy from the government since 1983. As of December 2014, the pricing of RON95 and diesel officially went on a managed float mechanism. Therefore, this study examines how information on oil shocks is transmitted to FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) upon the announcement of subsidy cut for RON95 fuel price on 2 October 2014. The sample period of September 2013–December 2014 is separated into the pre-announcement (3 September 2013–1 October 2014) and post-announcement (2 October 2014–28 November 2014) periods. Using the forecast error variance decomposition, the results indicate that Brent crude oil prices dominate information spillover during the post-announcement period. From the perspective of investors’ behaviour, this study suggests that investors’ sensitivity towards information on oil price is elevated by the announcement of subsidy cut and steers their consciousness towards information on oil prices in making decisions.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
