Multiscale Transmission of Volatility Between Short and Long-Term Investment Preferences: Evidence from Malaysia's KLCI

This study examines how short-term and long-term investments in Malaysia’s stock market influence each other through volatility spillovers. Using daily data from the KLCI index from 2014 to 2024, the research applies a combination of wavelet analysis and the Dynamic Granger Causality Multivariate Stochastic Volatility (DGC-t-MSV) model. This method allows us to study market behavior across different time periods and frequencies. The results show that there are significant volatility spillovers between short-term and long-term investments, with stronger effects coming from long-term (institutional) investments to short-term (retail) investments. Both types of investments also show strong persistence in volatility, meaning that once volatility appears, it tends to last. These findings are important for investors who need to manage risks and returns more effectively. They also provide useful insights for policymakers who aim to improve the stability of financial markets. By introducing a new approach to analyzing volatility spillovers, this research contributes to a better understanding of risk management in emerging markets like Malaysia.