ARFIMA model applied to Malaysian stock market

Abstract

In this paper we study Sukuk on the Islamic financial market of Malaysia, since they present favorable conditions for investment. The aim of our work is to concretely study the characteristic of long memory for our series; to study the impact of maturity on the long memory for the different studied series. We use government indexes of several maturities while comparing them with their counterparts in each maturity, over the periods from 2007 to 2017, while basing on the rate of return, risk measures that we calculate using Garch and EGarch Models; we have confirmed that more the maturity is higher more the volatility is higher, for the conventional bonds and conversely for the Islamic bonds. We confirmed also the presence of the long memory for conventional bonds of short and medium maturity while we captured it for Sukuk of long maturity using ARFIMA model to establish the relationships between maturity and long memory of our bonds.