Modeling Relationship Between Cocoa Beans Commodity Export Volatility and Stock Market Index (KLCI)

Abstract

Volatility of stock market plays important roles in investment world. Since the export of cocoa has a great contribution in increasing Malaysia’s revenue, it is important to know and understand the cocoa beans export volatility and the relationship with the stock market (KLCI). For that purpose, the well-known ARCH and GARCH family models were employed to investigate the relationship between volatility models and stock market (KLCI). These two models were also used to analyze empirically the volatility model of cocoa beans export. From the result, it showed that a unidirectional relation exists between stock market (KLCI) and cocoa bean volatility. The stock market (KLCI) had a causal effect on cocoa bean volatility in a short run.