Trend of Risk Components among Malaysian Stocks: Evidence from 2008 to 2014

Noor Azuddin Yakob, Stennylaus Duliman, Carl B. McGowan Jr.

Abstract


This study examines the nature of risk among Malaysian stocks from January 2008 to July 2014.  The paper applies the concept of risk decomposition as stipulated by the single index model (SIM) in which the total risk is partitioned into two main components, i.e. systematic and unsystematic risks. Forty-five companies were randomly selected as the sample for this study. The results show that the unsystematic risk is greater than the systematic risk for all three different time periods used in the study. The level of both types of risk changed over the two sub-periods. The portion of systematic risk has decreased and the unsystematic risk component has increased considerably. This suggests the need for analysts and investors to focus on the company-specific factors when evaluating the risk associated with Malaysian stocks given the greater influence that the unsystematic risk has on total risk.


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DOI: https://doi.org/10.11114/aef.v3i1.1252

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Applied Economics and Finance    ISSN 2332-7294 (Print)   ISSN 2332-7308 (Online)

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