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US unconventional monetary policy and Islamic equity indices

Author

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  • Sayyed Mahdi Ziaei

Abstract

Purpose - This paper aims to constitute to the first empirical work that investigated the effects of US unconventional monetary policy shocks on Islamic equities. Design/methodology/approach - The authors used the spread between sovereign (term spread) and corporate (corporate spread) yields as proxies of unconventional monetary policy in times that FED implemented different rounds of large-scale asset purchasing programs. Findings - This paper demonstrates that monetary policy shocks have significant effects on Islamic equities. The analysis showed substantial evidence that the corporate spread innovation was reflected as a positive signal in Islamic equity markets and has a larger impact on Islamic low leverage equities than term spread. Originality/value - The objective of this paper is to shed some insight into the effects of US unconventional monetary policy on low leverage financial assets. It is hypothesized that during this period, specifically from November 2008, unconventional monetary policy and zero bound interest rates have been implemented in the US economy. However, the strength of effects of this range of policies on Islamic financial products is unidentified.

Suggested Citation

  • Sayyed Mahdi Ziaei, 2018. "US unconventional monetary policy and Islamic equity indices," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 11(4), pages 575-590, May.
    • Handle: RePEc:eme:imefmp:imefm-11-2017-0299
    DOI: 10.1108/IMEFM-11-2017-0299
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    More about this item

    Keywords

    Quantitative easing; Islamic equity market; Monetary policy spillover; E43; E44; E47; E52; G12;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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