Volatility in Malaysian Stock Market: An Empirical Study Using Fractionally Integrated Approach

This study explores the fractionally integrated (FI) time series analysis in Malaysian stock market. Four proxies of latent volatility, namely the absolute return, squared return and range-based (Parkinson and Garman and Klass) volatilities are selected for the empirical studies. In addition, the well-known FI autoregressive conditional variance (ARCH) type model is also taken into account for comparison purposes. Our empirical results evidence the proxy of absolute return and ARCH-type volatility model provides better performances in both the estimation and forecasting evaluations.