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Stock Market Volatility Transmission in Malaysia: Islamic Versus Conventional Stock Market تأثير التقلبات في البورصة الماليزية: مقارنة سوق البورصة التقليدية بالإسلامية

Author

Listed:
  • Rosylin Mohd. Yusof

    (Head of the Department of Economics, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia. Department of Economics, Kulliyyah of Economics and Management Sciences, International Islamic University Malaysia.)

  • Shabri Abd. Majid

    (Department of Economics Kulliyyah of Economics and Management Sciences International Islamic University Malaysia)

Abstract

This study attempts to explore the extent to which the conditional volatilities of both conventional and Islamic stock markets in Malaysia are related to the conditional volatility of monetary policy variables. Among the monetary policy variables tested in the study are the narrow money supply (M1), the broad money supply (M2), interest rates (TBR), exchange rate (MYR), and Industrial Production Index (IPI), while the Kuala Lumpur Composite Index (KLCI) and Rashid Hussain Berhad Islamic Index (RHBII) are used as measures for conventional and Islamic stock markets, respectively. In order to capture the international influence on both stock markets, the volatility in the U.S. monetary policy variable measured by the Federal Funds Rate (FFR) is incorporated into the study. Unlike our earlier study (Mohd. Yusof and Abd. Majid, 2006) that employed the Generalized Autoregressive Conditional Heteroskedasticity (GARCH)-M, GARCH (1,1) framework together with Vector Autoregressive (VAR) analysis are employed for the monthly data starting from January 1992 to December 2000 in this study. The study finds that interest rate volatility affects the conventional stock market volatility but not the Islamic stock market volatility. This highlights the tenet of Islamic principles that the interest rate is not a significant variable in explaining stock market volatility. Our finding provides further support that stabilizing interest rate would have insignificant impact on the volatility of the Islamic stock markets. تسعى هذه الدراسة إلى كشف مدى ارتباط التقلبات المقيدة في كل من البورصتين التقليدية والإسلامية في ماليزيا بالتقلبات المماثلة في متغيرات النظام النقدي. ومن ضمن متغيرات النظام النقدي التي تم اختبارها: الاعتماد النقدي المحدود، الاعتماد النقدي الواسع، معدل الفائدة، سعر الصرف، ومؤشر الإنتاج الصناعي، في حين اعتُمد بهذا الخصوص مؤشر كوالالمبور التركيبي ومؤشر رشيد حسين برحد الإسلامي بوصفهما مثالين لقياس البورصتين التقليدية والإسلامية. ومن أجل تحديد التأثير العالمي على كلا النموذجين، ضمَّت الدراسة في جنباتها دراسة التقلبات في متغير النظام النقدي الأمريكي المقاس بمعدل الاعتمادات المالية الفدرالية. وبخلاف دراستنا السابقة (محمد يوسف وعبدالمجيد، 2006م) التي وظَّفت أسلوب اختلاف التباين المعمَّم المقيَّد المنحدر ذاتيَا (GRACH)-M، اعتُمد هنـا GRACH (1،1) مصحوباً بتحليل متجه الانحدار الذاتي (VAR) للبيانات الشهرية، وذلك بدءاً من يناير 1992م ولغاية ديسمبر 2000م. وقد توصلت الدراسة إلى أن تقلب نسبة الفائدة يؤثر في تقلبات البورصة التقليدية دون تقلبات البورصة الإسلامية. وهذا يُجلِّي صواب الاعتقاد -استناداً إلى الأسس الإسلامية- بأن نسبة الفائدة ليست متغيرًا خطيراً في تفسير تقلبات البورصة. إن ما توصلت إليه الدراسة يدعم الفكرة التي مفادها أن لتحديد نسبة ثابتة تأثيراً غيرَ هامّ على التقلبات التي تحدث في البورصة الإسلامية.

Suggested Citation

  • Rosylin Mohd. Yusof & Shabri Abd. Majid, 2007. "Stock Market Volatility Transmission in Malaysia: Islamic Versus Conventional Stock Market تأثير التقلبات في البورصة الماليزية: مقارنة سوق البورصة التقليدية بالإسلامية," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 20(2), pages 17-35, January.
    • Handle: RePEc:abd:kauiea:v:20:y:2007:i:2:no:2:p:17-35
    DOI: 10.4197/islec.20-2.2
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    Cited by:

    1. Abdullahi , Shafiu Ibrahim, 2021. "Islamic equities and COVID-19 pandemic: measuring Islamic stock indices correlation and volatility in period of crisis," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 29, pages 50-66.
    2. Brahim Roukiane & Abdenbi EL Marzouki, 2018. "Maturities and Dynamic Volatility of Sukuk Comparative Study Between a Sukuk and a Conventional Bond Index," Asian Development Policy Review, Asian Economic and Social Society, vol. 6(4), pages 226-242, December.
    3. M Dharani, 2011. "Seasonal Anomalies between S&P CNX Nifty Shariah Index and S&P CNX Nifty Index in India," Journal of Social and Development Sciences, AMH International, vol. 1(3), pages 101-108.
    4. Charles, Amélie & Darné, Olivier & Pop, Adrian, 2015. "Risk and ethical investment: Empirical evidence from Dow Jones Islamic indexes," Research in International Business and Finance, Elsevier, vol. 35(C), pages 33-56.
    5. Saban Nazlioglu & Shawkat Hammoudeh & Rangan Gupta, 2015. "Volatility transmission between Islamic and conventional equity markets: evidence from causality-in-variance test," Applied Economics, Taylor & Francis Journals, vol. 47(46), pages 4996-5011, October.
    6. Hasnie, Syed Sharjeel Ahmad & Collazzo, Pablo & Hassan, M. Kabir, 2022. "Risk assessment of equity-based conventional and islamic stock portfolios," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 363-378.
    7. Abdelbari El Khamlichi & Kabir Sarkar Humayun & Mohamed Arouri & Frédéric Teulon, 2014. "Are Islamic equity indices more efficient than their conventional counterparts ? Evidence from major global index families," Working Papers 2014-91, Department of Research, Ipag Business School.
    8. M Dharani, 2011. "Equanimity of Risk and Return Relationship between Shariah Index and General Index in India," Journal of Economics and Behavioral Studies, AMH International, vol. 2(5), pages 213-222.
    9. El Mehdi, Imen Khanchel & Mghaieth, Asma, 2017. "Volatility spillover and hedging strategies between Islamic and conventional stocks in the presence of asymmetry and long memory," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 595-611.
    10. Sing Tien Foo & Loh Kok Weng, 2014. "Predictability of Shariah-Compliant Stock and Real Estate Investments," International Real Estate Review, Global Social Science Institute, vol. 17(1), pages 23-46.
    11. CHATTI, Mohamed Ali & KABLAN, Sandrine & YOUSFI, Ouidad, 2010. "Activity diversification and performance of Islamic banks in Malaysia," MPRA Paper 28348, University Library of Munich, Germany.
    12. repec:ipg:wpaper:2014-091 is not listed on IDEAS
    13. Akhtar, Shumi & Akhtar, Farida & Jahromi, Maria & John, Kose, 2017. "Impact of interest rate surprises on Islamic and conventional stocks and bonds," Journal of International Money and Finance, Elsevier, vol. 79(C), pages 218-231.
    14. Albaity, Mohamed Shikh, 2011. "Impact of the monetary policy instruments on Islamic stock market index return," Economics Discussion Papers 2011-26, Kiel Institute for the World Economy (IfW Kiel).
    15. Dwita Sakuntala & M. Shabri Abd. Majid & Aliasuddin Aliasuddin & Suriani Suriani, 2022. "Causality between Green Stock Market with Monetary Policy, Global Uncertainty, and Environmental Damage in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 12(6), pages 215-223, November.
    16. Ben Rejeb, Aymen, 2017. "On the volatility spillover between lslamic and conventional stock markets: A quantile regression analysis," Research in International Business and Finance, Elsevier, vol. 42(C), pages 794-815.
    17. Alam, Md. Mahmudul & Akbar, Chowdhury Shahed, 2019. "Rationality of the Capital Market: Capitalistic System vs. Islamic System," SocArXiv 83ekv, Center for Open Science.
    18. Syed Adeel Hussain, 2013. "Differentiation of Market Risk Characteristics among Sharia Compliant and Conventional Equities listed on the Pakistani Capital Market - KSE 100 Index over a selective time period," 2013 Papers phu395, Job Market Papers.
    19. Majdoub, Jihed & Mansour, Walid, 2014. "Islamic equity market integration and volatility spillover between emerging and US stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 452-470.
    20. Naifar, Nader, 2016. "Do global risk factors and macroeconomic conditions affect global Islamic index dynamics? A quantile regression approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 29-39.
    21. Muhammad Wahyuddin Abdullah & Rika Musriani & Alim Syariati & Hadriana Hanafie, 2020. "Carbon Emission Disclosure in Indonesian Firms: The Test of Media-exposure Moderating Effects," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 732-741.
    22. Md Ejaz Rana & Waheed Akhter, 2015. "Performance of Islamic and conventional stock indices: empirical evidence from an emerging economy," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 1(1), pages 1-17, December.
    23. Ahmed, Walid M.A., 2019. "Islamic and conventional equity markets: Two sides of the same coin, or not?," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 191-205.
    24. Ben Rejeb, Aymen, 2016. "Volatility Spillover between Islamic and conventional stock markets: evidence from Quantile Regression analysis," MPRA Paper 73302, University Library of Munich, Germany.

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