The Effect of Goods and Services Tax (GST) Imposition on Stock Market Overreaction and Trading Volume in Malaysia and Australia

Lee Yok Yong, Mohamed Hisham Yahya, Bany Ariffin Amin Noordin, Aslam Izah Selamat

Abstract


ABSTRACT

This paper investigates the GST imposition effect on stock overreaction and trading volume in Bursa Malaysia and Australian Securities Exchange (ASX). To evaluate the stock overreaction, t-test, Wilcoxon Signed-Rank Test and Mann-Whitney U-Test are employed to analyse the market-adjusted abnormal returns. The homogeneity of stock trading volume is assessed by block resampling bootstrapping, t-test and regression. Consistent with the Overreaction Hypothesis, this research reveals that all arbitrage portfolios over one-month interval in Bursa Malaysia are able to generate significant abnormal profits. This infers the profitability of implementing short-term contrarian strategy in the Malaysian stock market. However, the analysis for ASX shows the opposite. Additionally, GST imposition reduces the trading volume in Bursa Malaysia but not in ASX. This empirical result will be of interest to the policymakers who are considering imposing tax on fee-based financial services, as well as the investors and fund managers who are concern about profits maximisation.

Keywords: Efficient market hypothesis; financial transaction tax; prospect theory; adaptive market hypothesis; overreaction hypothesis

ABSTRAK

Kajian ini bertujuan untuk menyiasat kesan pengenaan CBP ke atas reaksi pasaran saham dan jumlah dagangan saham di Bursa Malaysia dan Bursa Sekuriti Australia (ASX). Reaksi pasaran saham berlebihan dinilai dengan kaedah pulangan abnormal terlaras pasaran. Ianya disusuli kemudian dengan analisis ujian t, ujian pangkat bertanda Wilcoxon dan ujian Mann-Whitney. Kehomogenan jumlah dagangan saham dikaji dengan menggunakan persampelan semula blok bootstrapping, ujian t dan regresi. Selaras dengan hipotesis reaksi berlebihan, kajian ini menyimpulkan bahawa semua portfolio arbitraj berupaya menjana keuntungan luar biasa yang signifikan dalam tempoh sebulan. Keuntungan luar biasa tersebut dipengaruhi oleh jumlah dagangan saham di Bursa Malaysia. Justeru, penggunaan strategi kontrarian untuk jangka masa pendek boleh mendatangkan keuntungan abnormal di Bursa Malaysia. Walau bagaimanapun, ASX tidak menunjukkan sebarang keputusan empirikal yang signifikan untuk ini. Di samping itu, pengenaan CBP mengurangkan jumlah dagangan di Bursa Malaysia, tetapi tidak mempunyai perhubungan yang signifikan dengan jumlah dagangan di ASX. Keputusan empirikal ini boleh menarik minat para penggubal dasar di negara yang mempertimbangkan pengenaan CBP ke atas perkhidmatan kewangan berasaskan fi serta para pelabur dan pengurus dana yang ingin mengoptimumkan keuntungan.

Kata kunci: Hipotesis pasaran cekap; cukai transaksi kewangan; teori prospek; hipotesis pasaran mudah suai, hipotesis reaksi berlebihan


Keywords


Efficient Market Hypothesis (EMH); stock overreaction; trading volume; Prospect Theory; Adaptive Market Hypothesis (AMH), Overreaction Hypothesis

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