Monte Carlo Simulation for Data Volatility Analysis of Stock Prices in Islamic Finance for Malaysia Composite Index

Abstract

The objective of this study is to evaluate the volatility rate of sharia-company in Malaysia Stock Exchange using Monte Carlo Simulation (MCS). This study collected daily stock price form Thomson Reuters Datastream for calculating monthly return and volatility rate. In validating the findings of volatility rate, this study performed normality diagnostics test, and Monte Carlo Simulation (MCS). Result indicates the distribution of volatility rate is follows normal distribution. In addition, Monte Carlo Simulation also proved the volatility rate is 4.85% and standard deviation is 2.23. Result of process capability shows the value of volatility rate is under statistical control with implementation on Monte Carlo Simulation. The significant of this study is it provides a better understanding for investors regarding the financial environment in Malaysia Stock Exchange. This information will help investors to make proper selection of their investment portfolio.