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Geopolitical Risks and Movements in Islamic Bond and Equity Markets: A Note

Author

Listed:
  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon)

  • Riza Demirer

    (Department of Economics and Finance, Southern Illinois University Edwardsville, Edwardsville, USA)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

  • Hardik A. Marfatia

    (Department of Economics, Northeastern Illinois University, Chicago, USA)

Abstract

This study applies a non-parametric causality-in-quantiles test to examine the causal effect of geopolitical risks on return and volatility dynamics of Islamic equity and bond markets. Geopolitical risks are generally found to impact Islamic equity market volatility measures, rather than returns. However, Geopolitical risks tend to predict both returns and volatility measures of Islamic bonds. Interestingly, causality, when it exists for returns and/or volatility of Islamic equities and bonds, is found to hold over entire conditional distributions of returns and volatilities, barring the extreme ends of the same.

Suggested Citation

  • Elie Bouri & Riza Demirer & Rangan Gupta & Hardik A. Marfatia, 2017. "Geopolitical Risks and Movements in Islamic Bond and Equity Markets: A Note," Working Papers 201743, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201743
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    as
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    More about this item

    Keywords

    Geopolitical Risks; Islamic Stock and Bond Markets; Returns and Volatility; Quantile Causality;
    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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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