Chapter 1 Investigating International Portfolio Diversification Opportunities for the Asian Islamic Stock Market Investors

Abstract

The purpose of this chapter is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions' Islamic markets; namely USA, Europe, and BRIC. This study makes the initial attempt to fill in the gaps of previous studies by focusing on the proxies of global Islamic markets to identify the correlations among those selected markets by employing the recent econometric methodologies such as multivariate generalized autoregressive conditional heteroscedastic-dynamic conditional correlations (MGARCH-DCC), maximum overlap discrete wavelet transform (MODWT), and the continuous wavelet transform (CWT). By utilizing the MGARCHDCC, this chapter tries to identify the strength of the time-varying correlation among the markets. However, to see the timescale dependent nature of these mentioned correlations, the authors utilized CWT. For robustness, the authors have applied MODWT methodology as well. The findings tend to indicate that the Asian investors have better portfolio diversification opportunities with the US markets, followed by the European markets. BRIC markets do not offer any portfolio diversification benefits, which may be explained partly by the fact that the Asian markets cover partially the same countries of BRIC markets, namely India and China. Considering the time horizon dimension, the results narrow down the portfolio diversification opportunities only to the short-term investment horizons. The very short-run investors (up to eight days only) can benefit through portfolio diversification, especially in the US and European markets. The above-mentioned results have policy implications for the Asian Islamic investors (e.g., Portfolio Management and Strategic Investment Management).

Co-movements and diversification opportunities among Dow Jones Islamic indexes

“…Therefore, Dow Jones Islamic indexes are cointegrated and have a long run association. This result is similar to those of Yildirim and Masih (2018) who found that US, Asia, Europe, BRIC markets are highly correlated yielding minimal diversification benefits. Our eight indexes prices move together.…”

Examination of Leverage effect among India and Global GOLD Exchange Traded Funds

“…(Oertel et al, 2022)The risk management of transitory risk for tangible assets has gained significant interest among researchers and market participants, especially in the past ten years. (Yildirim & Masih, 2018) The findings indicate that Asian investors have better portfolio diversification opportunities with the US markets, followed by the European markets. (Sosa et al, 2019), our study analyzes the volatility of Bitcoin by employing and comparing symmetric and asymmetric GARCH model extensions (threshold ARCH (TARCH) and exponential GARCH (EGARCH)).…”