Testing for Predictive Ability of Conventional and Shariah Indices of Selected Gulf Countries and Economic Regions Using Neural Network Modelling

Siddiqui, Taufeeque Ahmad; Abdullah, Yusuf

doi:10.12816/0051161

Cited by 3 publications

(3 citation statements)

References 6 publications

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“…In contrast, Hussein and Omran (2005), Habib and Islam (2014) and Rana and Akhter (2015) find that the Sharīʿah indices underperform their conventional counterparts in Bahrain, India and Pakistan, respectively. Also, Siddiqui and Abdullah (2017) examine six pairs of conventional and Sharīʿah indices and unearth that the conventional indices are more efficient than the Sharīʿah ones.…”

Section: Literature Reviewmentioning

confidence: 99%

Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

Hasan

Rafiq

Wahid

2020

IMEFM

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Purpose This paper aims to examine whether the Sharīʿah indices outperform the conventional indices as evident from Dhaka Stock Exchange (DSE). To achieve the objective, the study, first, assesses the risk adjusted returns of the Sharīʿah and conventional indices and compares the same between the two indices. Second, it examines the short-run and long-run associations between the two indices. Design/methodology/approach The DSEX Sharīʿah index and DSE broad index of the DSE are used as representatives of the Sharīʿah and conventional indices, respectively. The study uses monthly data for the period 2014–2018 and applies a number of techniques such as risk adjusted returns, Johansen’s cointegration test, vector error correction model, Granger causality test, forecast error variance decomposition and impulse response functions techniques. Findings The study reveals that albeit there is no significant difference in simple mean between the two indices, the Sharīʿah index outperforms its conventional counterpart based on the risk adjusted returns. The two indices are associated only in the long-run, while no causal relationship is spotted between them. The overall results show that the Sharīʿah index has dominance over the conventional index in Bangladesh. Research limitations/implications The study could use more pairs of indices, including additional variables such as financial crisis and macroeconomic variables. Practical implications The study has important implications to investors, especially the religious Muslims and ethical ones, who are suggested to invest their funds in the Sharīʿah index without sacrificing returns, rather be monetarily more benefited. Moreover, the other investors can generate diversification benefits by adding both Sharīʿah and conventional indices in their portfolios in the short-run. Originality/value Unlike previous studies, this study endeavors to use a comprehensive methodology to conduct its analysis. Moreover, this is supposedly the first ever effort to conduct such a study in the context of Bangladesh.

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Section: Literature Reviewmentioning

confidence: 99%

Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

Hasan

Rafiq

Wahid

2020

IMEFM

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“…On the other hand, only one study was found that specifically forecasts the sukuk prices using the ANN model (Hila et al, 2019). However, it is worth mentioning the studies using the ANN model in the index forecasting of Islamic stock (Siddiqui & Abdullah, 2017) and sukuk rating classification (Arundina et al, 2015(Arundina et al, , 2016, even if it is not used to directly forecast sukuk prices. These studies are briefly explained in their chronological order as follows: Wardani et al (2020), forecasted the sovereign sukuk returns, that the state issued for financing the research and development activities in Indonesia, under different price scenarios (continuity, abandonment, and substitution scenarios) with a binomial decision tree approach.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This study, which is the first using the K nearest neighbourhood method in sukuk prices data, reveals the suitability of the method for financial problems. Siddiqui and Abdullah (2017), used a multilayer perceptron ANN model to forecast the Islamic and conventional stock index returns of Saudi Arabia, Oman, UAE, GCC, BRICS and the EU Region. The results revealed that the macroeconomic variables used in the forecast model produced more accurate results in predicting Saudi Arabia, Oman and UAE stock prices.…”

Section: Literature Reviewmentioning

confidence: 99%

Forecasting of Turkish Sovereign Sukuk Prices Using Artificial Neural Network Model

ÇETİN>¹,

Metlek²

2021

acin

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Recently, artificial neural networks have been successfully applied in many areas such as forecasting financial time series, predicting financial failure, and classification of ratings. However, it has hardly been applied in forecasting sukuk prices, which is considered the most common Islamic capital market instrument. Since sukuk is a new financial asset, there are not enough studies in this area. Therefore, this study aims to forecast the Turkish sovereign sukuk prices using with artificial neural network model and to reveal the determinants in the forecasting of sukuk prices. For this purpose, a multi-layer feed forward artificial neural network model is designed using dollar-based international sovereign sukuk price data issued by the Turkish Ministry of Treasury and Finance. The dollar index, volatility index, geopolitical risk index, Standard and Poor's Middle East and North Africa sukuk index, and Eurobond prices constituted as input variables of the designed model and the sovereign sukuk prices formed the output. As a result, the sovereign sukuk prices were forecasted accurately at the success rate of 99.98%. The accurate forecasting of sukuk prices will play a critical role in reducing the risk perception of sukuk investors and increasing their profitability. The findings of the study are important in terms of proving that the artificial neural network model is an effective model for forecasting the sukuk prices and revealing that the dollar index, volatility index, geopolitical risk index, Standard and Poor's MENA sukuk index, and Eurobond prices are determinants in forecasting sukuk prices.

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A new approach to forecasting Islamic and conventional oil and gas stock prices

Ghaemi Asl,

Adekoya,

Rashidi

et al. 2024

International Review of Economics & Finance

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Testing for Predictive Ability of Conventional and Shariah Indices of Selected Gulf Countries and Economic Regions Using Neural Network Modelling

Cited by 3 publications

References 6 publications

Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

Forecasting of Turkish Sovereign Sukuk Prices Using Artificial Neural Network Model

A new approach to forecasting Islamic and conventional oil and gas stock prices

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