The relationship of macro factors and different investment asstes class during financial crisis

Abstract

In Malaysia there are many investment assets for investors to choose. However, investors lack knowledge and guidance to determine the right time to invest and the selection of asset. The investment market are influenced by the local, regional and world economic cycles. The issue that need to be addressed is to measure investment performance in Malaysia. Thus, there is a need for investors to know when and what to choose from the investment market. This research investigates the performance of Different Investment Assets Classes (DIAC) during financial crisis. The aim of this thesis is to assess the investment performance of DIAC and how macro economic factors are affecting their performance. Adopting the adjusted rate of return as a basis of performance measurement, the performance of DIAC was analysed during two regional and global economic crisis namely the Asian Financial Crisis (AFC) and Global Financial Crisis (GFC) using two sub period panel data. The first period is between December 1977 – December 2003 and the second period is from January 2004 – December 2011. Data on returns and risk for various DIAC such asBonds, Share, Plantation, Industrial, Properties, Financial and Cash are acquired through Data Stream. Yearly returns and risk of the different asset class investment was tabulated and a data base for asset returns were created. The analysis of Risk adjusted showed that all DIAC were affected by both economic crises.However, among all DIAC, Bonds is the safest investment followed by Plantation, Industrial and Finance while the most risky assets are Shares and Properties.This suggests that macro economic factors have an impact on DIAC performances. In determining the relationship between DIAC and selected macroeconomic variables a correlation analysis was carried out during both economic crisis. The cause and effect analysis were carried out to assess the type of relationship between macro economic factors and return of DIAC. The result reveals that GDP and DIAC performance have two ways effect. This suggests that the changes in GDP are an important factor in determining the performance of DIAC.