Malaysian Futures Market” Impact of Liquidity & Volatility On Performance Of Futures Index (Final Copy-For Evaluation by Supervisor)

Abstract

This Thesis Study has been conducted on Malaysian Futures Index Market. But the findings, analysis and conclusions derived are applicable to all commodity futures index markets. Since impact of liquidity has been researched previously as well for other exchanges, I have added another variable of volatility and derived the impact analysis of both variables on a financial ratio called as Return on Investment or ROI. Methodology involved includes use of VAR or Vector Auto-Regression models of Microsoft Excel Sheet Application. A vector methodology has been used, as data is multi-period or over a span of time period where each time period can be called as one vector for the underlying models of Microsoft Excel Sheet Application. These models automatically pick data from highlighted vectors/time periods and compute regression and correlation results. Correlation Analysis has also been conducted along with ‘skewness’ calculations for each data set to support thesis analysis claims and general raw data integrity. Study limitations like law and order, macro and micro economic conditions have also been covered in study limitations section and explained for as to why these factors were not considered for thesis analysis. Future research has been suggested on the Risk Analysis of Futures Index Market. The recommendation made requires individual company’s futures portfolio data for any futures index or to put simply risk portfolio be related in terms of impact on returns from such securities portfolio. Then an annual averaging of results from such risk portfolio be linked and analyzed in terms of impact on averaged annual returns for individual companies and also compare it with any futures main index net risk portfolios data. Thereby, helping to analyze impact of overall risk behavior for any futures index on returns from such futures indices.