Common shocks, common transmission mechanisms and time-varying connectedness among Dow Jones Islamic stock market indices and global risk factors

Haddad, Hedi Ben; Mezghani, Imed; Dohaiman, Mohammed Al

doi:10.1016/j.ecosys.2020.100760

Cited by 36 publications

(26 citation statements)

References 67 publications

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“…In another study, Abduh (2020) investigated the volatility of conventional and Islamic indices and the impact of the global financial crisis toward the volatility of both markets in Malaysia; and finds that Islamic index was less volatile during the crisis compared to the conventional index. In another key study, Haddad et al (2020) examined the importance of permanent versus transitory shocks as well as their domestic and foreign components in explaining the business cycle fluctuations of seven Dow Jones Islamic stock markets (DJIM). They found that seven Dow Jones Islamic stock indices are insignificantly linked to the movements of global risk factors.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Arguably the most contentious issue about faith-based investments vehicle is whether ethical overlays have a bearing on financial performance. Whilst a number of previous studies have considered this area ( Hammoudeh et al, 2014 , Al-Khazali et al, 2014 , Fu et al, 2020 , Abu-Alkheil et al, 2020 , Umar et al, 2020 , Climent et al, 2020 , Haddad et al, 2020 , Rehman et al, 2020 , Anjum, 2020 , Widyanata and Bashir, 2020 , Sherif, 2016 ), much uncertainty remains regarding the significant differences between conventional and faith-based investments. The general perception and critique facing ethical investments stem from their contradiction with the principles of the efficient portfolio theory of Markowitz 1952, cited in Dhrymes (2017) .…”

Section: Introductionmentioning

confidence: 99%

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The impact of Coronavirus (COVID-19) outbreak on faith-based investments: An original analysis

Sherif

2020

Journal of Behavioral and Experimental Finance

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This paper examines the rapid spread of Coronavirus (COVID-19) and its short-term impact on the Shariah-compliant UK Dow Jones market index to capture the dynamic behavior of stock returns at economy and industry levels. Using daily data over the period January 20 to May 20 and ten UK industrial sector groupings, the findings suggest a strong and statistically significant relationship between the COVID-19 pandemic and the performance of the conventional stock market index. The findings also suggest that the disease interacts negatively but insignificantly with the Dow Jones faith-based ethical (Islamic) index compared to its UK counterpart. In addition, through an analysis of sector groupings, the paper shows that the stock returns of the information technology sector performed significantly better than the market, while stock returns of consumer discretionary sector, which includes transportation, beverages, tourism and leisure, consumer services performed significantly worse than the market during the COVID-19 outbreak. Other sector groupings fail to yield significantly plausible parameter values.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The impact of Coronavirus (COVID-19) outbreak on faith-based investments: An original analysis

Sherif

2020

Journal of Behavioral and Experimental Finance

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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%

“…Erdogan et al (2020) prove the US Dollar exchange rate volatility toward Turkey's Islamic stock market. US Is-lamic stock index volatility is known to cause a spillover effect on the ASEAN & Asia-Pacific Islamic stock markets (Sakti 2014, Haddad et al 2020. A study by Kim and Nguyen (2009) highlights that US monetary policy in the form of FFR adjustment influences ASEAN stock market volatility.…”

mentioning

confidence: 99%

“…The US 10-year Tbond yield has become a standard proxy for benchmark interest rate and long-term investor expectations in many studies. It was proved to influence world Islamic stock market volatility (using Dow Jones Islamic Market index as a proxy) (Shahzad et al 2017) and particularly in Asia-Pacific (Haddad et al 2020). The US Uncertainty Index (UCT) factor is a daily stock market uncertainty index reflecting macroeconomic conditions and government policies.…”

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confidence: 99%

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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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Margin buying activity and stock market trading in China: Is there a connection?

Hong,

Wu,

Zhang

2024

Int. J Fin Econ

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This paper examines the dynamic linkage between margin buying activity and stock market trading in China. Built upon a multivariate DCC‐GJRGARCH model and the spillover index method, the results highlight a high dynamic conditional correlation between margin buying activity and stock market trading which shows apparent time‐varying features. Furthermore, there is a two‐way risk‐spillover relationship, with stock market trading playing a dominant role in risk transmission. More importantly, the level of risk contagion actually varies over time due to certain large external shocks. Margin buying activity tends to be a mean risk‐spillover receiver most time, whereas it acts as both a volatility risk‐spillover transmitter and a receiver over the entire sample period. The analysis thus implies that margin buying activity does have a close interrelationship with stock market trading in China, which has important implications for both regulators and investors.

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Common shocks, common transmission mechanisms and time-varying connectedness among Dow Jones Islamic stock market indices and global risk factors

Cited by 36 publications

References 67 publications

The impact of Coronavirus (COVID-19) outbreak on faith-based investments: An original analysis

The impact of Coronavirus (COVID-19) outbreak on faith-based investments: An original analysis

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

Margin buying activity and stock market trading in China: Is there a connection?

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