INFLUENCE OF BEHAVIOURAL ELEMENT ON STOCK RISK: EVIDENCE FROM MALAYSIAN LISTED COMPANIES

Abstract

This paper examined the influence of behavioural element on stock risk of Malaysian listed companies. There were 90 firms consisting of 30 large capitalizations, 30 middle capitalization and 30 small capitalization firms. The time frame for this research is 5 years ranging from 2012 to 2016. The dependent variable, stock risk, is represented by two proxies, Beta and Standard Deviation. The independent variables of this research are liquidity, profitability, gearing and behavioural element. The non-behavioural factors were added to examine if those factors also play a part in determining stock risk. By employing an Ordinary Least Square regression, the results showed that when the stock risk is proxied by systematic risk or Beta, the behavioural factor is significant while all the other non-behavioural factors are found not. However, if the stock risk is unsystematic risk or Standard Deviation, the behavioural factor is not significant while the liquidity and gearing variables are significant.