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Separating BRIC using Islamic stocks and crude oil: dynamic conditional correlation and volatility spillover analysis

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  • Hassan, Kamrul
  • Hoque, Ariful
  • Gasbarro, Dominic

Abstract

This paper explores the dynamic conditional correlation and volatility linkage between Islamic indexes and oil for BRIC countries. Correlations between these assets increase during the global financial crisis for India and China but not for Brazil and Russia. The volatility error forecast variance of all five indexes comes from spillover but is much lower compared to volatility spillover between conventional indexes and oil. Hedging performance of Islamic indexes are superior in India and China compared to conventional indexes in emerging markets. An optimal minimum-variance portfolio without reducing expected return can be achieved by investing in lower weights of BRIC Islamic indexes and oil compared to conventional indexes.

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  • Hassan, Kamrul & Hoque, Ariful & Gasbarro, Dominic, 2019. "Separating BRIC using Islamic stocks and crude oil: dynamic conditional correlation and volatility spillover analysis," Energy Economics, Elsevier, vol. 80(C), pages 950-969.
    • Handle: RePEc:eee:eneeco:v:80:y:2019:i:c:p:950-969
    DOI: 10.1016/j.eneco.2019.02.016
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    More about this item

    Keywords

    Islamic indexes; Global financial crisis; Dynamic conditional; Correlation; Spillover;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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