Abstract

The interests in capital market investments are seen to increase in proportion year after year. Due to the advancement in technology, bonds which needed investors to be physically present at the trade center now only needs the investors to be present virtually, with of course money and the internet connection.

However, this piques interest in bond price prediction mechanism. It has been reported before that Malaysia has a weakly efficient bond market and that with properly developed prediction tools, extraordinary profits are possible. Based on that, the bonds historical prices of 77 bonds were used to forecast future prices using the Macauley Duration’s and Value at Risk.

The results showed that the forecasted prices significantly didn’t match the actual prices and that the prices follow the random walk process. A further improved study will be needed to explore further into this results.