Can alternative hedging assets add value to Islamic-conventional portfolio mix: Evidence from MGARCH models

Raza, Naveed; Ali, Sajid; Shahzad, Syed Jawad Hussain; Rehman, Mobeen Ur; Salman, Ali

doi:10.1016/j.resourpol.2019.02.013

Cited by 38 publications

(15 citation statements)

References 63 publications

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“…Previous studies apply a variety of methods that mostly involve generalized autoregressive conditional heteroskedasticity (GARCH)-based models and conditional correlation (e.g. Basher and Sadorsky, 2016; Raza et al, 2019) while considering the aggregate level of equity indices. However, the use of aggregate equity indices masks the relationship at the sectoral level and thus potential heterogeneity in hedging inferences.…”

Section: Related Studiesmentioning

confidence: 99%

Hedging the risk of travel and leisure stocks: The role of crude oil

Jalkh

Bouri

et al. 2020

Tourism Economics

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Unlike previous studies, we examine which of the implied volatilities of US stock and crude oil markets are more suitable and effective hedge for the downside risk of US travel and leisure (T&L) stocks. Using the corrected dynamic conditional correlation process, the results show that the T&L stock index is more negatively and more consistently correlated with the implied volatility of crude oil prices, suggesting that the oil implied volatility is a more suitable hedging asset. Similar results are reported for France, the United Kingdom, and developed markets. They are robust to the frequency of the data and model specification. Furthermore, the hedge ratios vary over time, which requires a regular update of hedged positions. Importantly, the highest hedge effectiveness is associated with the oil implied volatility.

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Section: Related Studiesmentioning

confidence: 99%

Hedging the risk of travel and leisure stocks: The role of crude oil

Jalkh

Bouri

et al. 2020

Tourism Economics

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“…The ADCC-GARCH method allows asymmetric effects in conditional variants and conditional correlations to increase over time as well as lower diversification during volatile conditions (Gjika & Horváth, 2013). Raza et al (2019) show that the ADCC-GARCH analysis technique with alternative gold assets can provide a better diversification effect and return. Thus, this research also aims to compare the performance formed between the DCC-GARCH and ADCC-GARCH analysis techniques, because the ADCC-GARCH analysis technique is considered better.…”

Section: H1b: Portfolios Formed By the Adcc-garch Analysis Technique ...mentioning

confidence: 92%

“…Therefore, gold can be included in the formation of a dynamic portfolio which is still rarely studied in Indonesia. In addition, portfolios using asset classes with different values can produce better returns (Raza et al 2019).…”

Section: Introductionmentioning

confidence: 99%

Revisit the Dynamic Portfolio Formation between Gold and Stocks in Indonesia in the Period Before and During the COVID-19 Pandemic

Yuliana

Robiyanto

2022

jasf

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This research aims to review the formation of the dynamic portfolio of individual stocks and gold using the DCC-GARCH and ADCC-GARCH analysis techniques in the periods before and during the COVID-19 pandemic. This is done so that individual investors and investment managers will be able to apply this method. This research uses data from the period of October 2019 - September 2020 with a research sample of nine stocks that are included in the IDX-30. The results showed that the DCC-GARCH analysis technique before the COVID-19 pandemic and the performance of the dynamic portfolios that were unhedged and hedged had no difference. This is due to the conditions in the period before the COVID-19 pandemic which still tended to be stable, thus, no safe-haven asset is needed. Meanwhile, in the period during the COVID-19 pandemic, using the DCC-GARCH analysis technique, there were differences because conditions have started to fluctuate in uncertainty which resulted in the need for safe-haven assets. On the other hand, using the ADCC-GARCH analysis technique on the periods before and during the COVID-19 pandemic, the performance of the dynamic portfolios that were unhedged and hedged showed a difference. Because the ADCC-GARCH technique is able to see asymmetric volatility for the future, adding gold to a portfolio can reduce risk when there is uncertainty. This research also found that the ADCC-GARCH technique had better performance than the DCC-GARCH technique.

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“…FFR influence can be reflected by the US 3-month T-bill rate (Yang & Hamori 2014). Several studies show that the Islamic stock market volatility increases during a crisis due to various macroeconomic factors, such as the instability of the US 10-year T-bond yield (Shahzad et al 2020, Haddad et al 2020, US Uncertainty Index (UCT) (Nazlioglu et al 2015), and the fluctuation of the Chicago Board Options Exchange Volatility Index (CBOE VIX) (Raza et al 2019).…”

mentioning

confidence: 99%

“…Another macroeconomic factor is the Chicago Board Options Exchange Volatility Index (CBOE VIX), an indicator of market volatility and investors' risk-aversion level. CBOE VIX is known to have a negative correlation and low spillover effect on the Asia-Pacific Islamic stock market (Raza et al 2019).…”

mentioning

confidence: 99%

The Impact of U.S Monetary Policy and Macroeconomics Factors on Asia Emerging Islamic Stock Market During Covid-19

Kasih¹,

Viverita²

2021

Proceedings of the 18th International Symposium on Management (INSYMA 2021)

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Global Islamic fund assets, including the Islamic stock market, have rapidly developed from USD 22.6 billion in 2010 to USD 33.2 billion in 2017. This development is inseparable from the investor's confidence to invest in Islamic stocks, which have proven to be more resilient during the crisis (Rizvi 2015, Majid 2018) due to a low debt ratio compared to conventional stocks. According to Morgan Stanley Capital International (MSCI) screening criteria, Islamic stock market constituents are not allowed to have prohibited activities according to Islamic rules. Those activities involving riba (interest), gharar (uncertainty), maysir (gambling), and having more than 33% debt ratio of total assets. The different constituents between conventional and Islamic stock markets cause the two market indices not necessarily to have the same movements. This difference then raises a decoupling hypothesis that Islamic stocks can be used as diversification assets in portfolios (Usman et al. 2019).Asia is known as a region with the most developing countries and is the largest market for Islamic funds in the world. Asia Islamic fund capitalization fills 42.8% of the world's Islamic fund assets and has a Compounded Annual Growth Rate (CAGR) of 6% (Malaysia International Islamic Financial Center 2018). This large proportion results in integration between the Asia Islamic stock market and the world stock market, as reflected by the US Islamic stock market index (Caporale et al. 2019). As a developed country, the US has a strong influence on the world economy, including the Asia Islamic stock market. US monetary policy can be transmitted to the Asia Islamic stock market through exchange rate (Erdogan et al. 2020) and interest rate / Federal Fund Rate (FFR)

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Can alternative hedging assets add value to Islamic-conventional portfolio mix: Evidence from MGARCH models

Cited by 38 publications

References 63 publications

Hedging the risk of travel and leisure stocks: The role of crude oil

Hedging the risk of travel and leisure stocks: The role of crude oil

Revisit the Dynamic Portfolio Formation between Gold and Stocks in Indonesia in the Period Before and During the COVID-19 Pandemic

The Impact of U.S Monetary Policy and Macroeconomics Factors on Asia Emerging Islamic Stock Market During Covid-19

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