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The purpose of this paper is to examine the effect of GST announcements (pre and post) on Malaysian stock market index. This study also utilised intraday data to look into intraday market volatility post-GST announcement.

Both daily closing prices and intraday data of different frequencies are used to capture the extent of stock market volatility as well as the subsided period of the volatility. The period of study ranges from June 2009 to November 2016 and empirical estimation is based on the GARCH (1, 1) model for the pre- and post-GST announcements.

Persistent market volatility in the post-GST announcement is empirically recorded and the volatility is higher in the post-GST announcement than the pre-GST announcement. This demonstrates the unwillingness and reaction of the market towards the tax policy implementation. Market expectation on GST implementation towards the increase in the cost of living following the increase in the prices of goods and services in Malaysia is empirically supported in the post-GST announcement.

The finding on this study is consistent with the expectation of the market that GST implementation will increase the price of the goods and services and hence increase the cost of living. This is supported by a noticeable increase in the stock market volatility in the post-GST announcement. Although GST announcement could be classified as a scheduled announcement, unwillingness to accept the policy prevails as shown by the increase in the stock market volatility.

The effects of Asian and global financial crisis are the major focus of past studies on stock market volatility, whereas this study examines and highlights the effect of the GST announcement on stock market volatility and the use of intraday data to further examine the nature of the volatility.

The purpose of this paper is to examine the impact of the Goods and Service Tax (GST) implementation on Malaysian stock market index.

This study used daily closing prices of the Malaysian stock index and futures markets for the period ranging from June 2009 to November 2016. Empirical estimation is based on the generalised autoregressive conditional heteroscedasticity (1, 1) model for pre- and post-announcement of the GST.

Result shows that volatility of Malaysian stock market index increases in the post-announcement than in the pre-announcement of the GST which indicates that educative programs employed by the government before the GST announcement did not yield meaningful result. The volatility of the Malaysian stock market index is persistent during the GST announcement and highly persistent after the implementation. Noticeable increase in post-announcement is in support with the expectation of the market about GST policy in Malaysia.

The finding of this study is consistent with expectation of the market that GST policy will increase the price of the goods and services and might reduce standard of living. This is supported by a noticeable increase in the volatility of the Malaysian stock market index in the post-announcement of GST which is empirically shown during the announcement and after the implementation of GST. Although the GST announcement could be classified as a scheduled announcement, unwillingness to accept the policy prevails in the market as shown by the increase in the market volatility.

Past studies on Malaysian stock market index volatility focus on the impact of Asian and global financial crisis whereas this study examines the impact of the GST announcement and implementation on the volatility of the Malaysian stock market index.