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The Co-movement of Selective Conventional and Islamic Stock Indices: Is there any Impact on Shariah Compliant Equity Investment in China?

Author

Listed:
  • Buerhan Saiti

    (Institute of Islamic Banking and Finance, International Islamic University Malaysia, Jalan Gombak, 53100 Kuala Lumpur, Selangor, Malaysia,)

  • Mansur Masih

    (Department of Finance and Econometrics, INCEIF, The Global University of Islamic Finance, Malaysia.)

Abstract

This paper investigates the dynamic causal linkages in the daily returns among four conventional and three Shariah compliant indices (such as, Financial Times Stock Exchange Shariah China Index, Asia Shariah Index, Malaysia EMAS Shariah Index, China Shanghai Stock Exchange [SSE] Composite Index, Hang Seng Index, Nikkei 225 and KOSPI) in Asia region through the application of the standard time series techniques. Essentially, the purpose of this research is to identify the extent of influence of conventional and Islamic, regional and international equity markets on Shariah compliant equity investment in China. Our study is focused on investigating the following empirical questions: (i) Which indices do the ShariahChina Index commove with? (ii) Which indices is the Shariah China Index Granger-causally related with? and (iii) Which major stock index was driving the selective conventional and Shariah compliant stock indices? Our findings tend to suggest: (i) The Shariah China Index appears to have a theoretical and long-run comovement with all the select conventional and Shariah compliant stock indices (as evidenced in the Cointegration and LRSM tests) (ii) The Shariah China Index is Granger-caused by all the conventional and Shariah compliant stock indices (as evidenced in the vector error correction modelling tests) (iii) Finally, what stands out is the leadership of the China conventional SSE market followed by the Malaysia Shariahmarket in driving all indices including the Shariah China Index (as evidenced in the VDCs tests)

Suggested Citation

  • Buerhan Saiti & Mansur Masih, 2016. "The Co-movement of Selective Conventional and Islamic Stock Indices: Is there any Impact on Shariah Compliant Equity Investment in China?," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1895-1905.
    • Handle: RePEc:eco:journ1:2016-04-80
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    References listed on IDEAS

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    Cited by:

    1. Intekhab Alam & Pouya Seifzadeh, 2020. "Marketing Islamic Financial Services: A Review, Critique, and Agenda for Future Research," JRFM, MDPI, vol. 13(1), pages 1-19, January.
    2. Mohammad Sahabuddin & Md. Aminul Islam & Mosab I. Tabash & Md. Kausar Alam & Linda Nalini Daniel & Imad Ibraheem Mostafa, 2023. "Dynamic Conditional Correlation and Volatility Spillover between Conventional and Islamic Stock Markets: Evidence from Developed and Emerging Countries," JRFM, MDPI, vol. 16(2), pages 1-19, February.

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    More about this item

    Keywords

    Islamic Finance; Shariah Compliant Equity Investment; Time Series Analysis;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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