Revisiting Inter-Sectoral Diversification Theory

Abstract

Malaysia wants to be a fully developed nation, and the government has made every effort to make that happen. Since 1997, the Malaysian stock market has seen a sharp increase in investment from foreign, institutional, and individual investors. However, the 2007 phenomenon and certain recent events have led the stock market to fluctuate greatly, making it difficult for analysts to make accurate predictions. we need a better understanding of the transmission mechanism of stock price formation so then investor can predict well the stock. Most of the investors, they believe that stock price index is one of the most important indicators that may use to predict whether it is a good timing to invest or not to invest. The reason why we need to study about stock market, it is because if we cannot predict stock market. For the investor, it may difficult for them. They do not know which stock they should buy. Since stock market in some event occur difficult from them to choose the right shares to buy. Example like, after the great depression Asian Crisis 1997, Malaysia stock price index drop significantly. At that time, no one can predict anything. Since the market are unpredictable.