Abstract
This study intends to investigate whether political election effect is one of the Malaysian stock market anomalies. The time-varying fractal structure of the Malaysian stock market is examined under the impact of three consecutive general election periods. According to the fractal market hypothesis, this self-similarity behaviour might be triggered by the interactions of market participants with different time horizon (short-, medium-or long-term) investments and their different ways interpreting market information. Under normal market conditions, these interactions (trading) among the market participants somehow created a financial market stability in term of market liquidity. However, the fractal structure is ruined when either one of the time horizon market participants dominating the markets. In other words, the market liquidity condition is vanished as trading become unbalance among the different time horizon market participants. In this specific study, we investigate the impact of three most recent general elections to the Malaysian stock market liquidity. First, an ARIMA autoregressive conditional heteroscedastic model is used to filter the possible short memory returns. After that, a rolling time-window method is utilised to examine the fractal structure of the stock market. The estimated Hurst parameter suggested that there is a tendency of fractal structure disruption before all the three elections in the Malaysian stock markets. Whether the stock market can reclaim back the fractal structure is very much depends on the political stability after the election.