The Effect of the Commodity Price on Sharia Stock Markets Volatility in Developed and Developing Countries

Abstract

This research examines the effect of commodity price on Sharia stock markets volatility in both the developed and developing countries. The current study explores the time series as analysis of economic variables and Sharia stock markets by applying the Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model. The commodity price include world oil price and gold price. For representation of Sharia stock markets are Indonesia Sharia Index (ISSI), FTSE Bursa Malaysia Hijrah Sharia Index (FBMHS Index), S&P Japan 500 Sharia Index (SHJ Index), and S&P 500 Sharia Index (SHX Index). The daily data of the variables for the time period from 1st July 2011 to 31th May 2016 is used for the current study analysis. The ADF test is used to check the stationary in the data respectively. The results show that commodity price have substantial influence on the stock prices volatility. The commodity price on Sharia stock markets volatility in developed and developing countries and are consider as the best indicators for future prediction of the market and economy as well. The movement of commodity prices in the market can affect the movement of stock prices in the capital market.

Examining the Role of Inflation Moderation in Mitigating the Impact of Crude Oil Prices on Indonesia's Sharia Stock Market

“…Some research suggests that Sharia Stock Markets may exhibit different reactions to inflation compared to conventional stock markets, possibly due to the prohibition of prohibited goods and an aversion to excessive risktaking in Islamic financial principles (Indarwati & Widarjono, 2021;Nurhayadi & Rito, 2019). Moreover, the impact of inflation on the volatility of Sharia Stock Markets in developed and developing countries has been explored, with findings suggesting that Islamic stock indices may demonstrate greater resilience to financial crises and unique characteristics that differentiate them from conventional stock markets (Sampurna & Maronrong, 2019). While previous research results have shown varying interpretations of the impact of inflation on the Sharia Stock Market in Indonesia, with some studies stating a negative effect (Abdul Jabar & Cahyadi, 2020;Ash-shiddiqy, 2018;Fuadi, 2020;Handriani, Isnurhadi, Yuliani, & Sulastri, 2021;Masrizal, Sukmana, Al Mustofa, & Herianingrum, 2021;Nawindra & Wijayanto, 2020;Noval & Nadia, 2020;Sari & Latief, 2020), while others stating that inflation has no significant effect or even a positive effect (Anwar & A, 2020;Mahrina, 2020;Sukmayadi & Oktaviani, 2019;Umam, Ratnasari, & Herianingrum, 2019).…”