Title

Economic Crisis and Investor Behaviour

Author First name, Last name, Institution

Tolga Omay
Perihan Iren

Document Type

Article

Source of Publication

SSRN Electronic Journal

Publication Date

1-1-2016

Abstract

This study investigates the effects of crises on domestic and foreign investors’ behaviours by utilizing a nonlinear approach. Considering the nonlinearity inherent in many financial variables, this study proposes an appropriate econometric modelling for analysing the investors’ behaviour, particularly during turbulent times. Specifically, STAR-STGARCH family models and generalized impulse response function analysis (GIRF) are employed to understand the different reactions of foreign and domestic investors at the Malaysian Stock Exchange market during the 1997 Asian crisis. The results of the model and the GIRF analysis have shown that foreign investors exhibited a herding behavior during the crisis and responded the shock more quickly than the domestic investors. When the same analysis is applied to understand the effects of the 2008 Subprime Mortgage Crisis in the Malaysian market, the behaviors of foreign and domestic investors are found to be very similar.

ISSN

1556-5068

Publisher

Elsevier BV

Disciplines

Business

Indexed in Scopus

no

Open Access

yes

Open Access Type

Green: A manuscript of this publication is openly available in a repository

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