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Volatility Contagion and Portfolio Diversification among Shariah and Conventional Indices: An Evidence by MGARCH Models عدوى التقلبات و تنوع التصورات في أحكام الشريعة الإسلامية والأحكام التقليدية: إثبات توكيدي من خلال تطبيق نماذج MGARCH

Author

Listed:
  • Safika Praveen Sheikh

    (Junior Consultant, DEA-NIFM Programme, Ministry of Finance, New Delhi, India)

  • Shafkat Shafi Dar

    (PhD Scholar, Indian Institute of Technology, Kanpur, India)

  • Sajad Ahmad Rather

    (Assistant Professor, Baba Ghulam Shah Badshah University, Jammu & Kashmir, India)

Abstract

Risk mitigation is one of the main concerns for an investor, and has gotten renewed attention after the 2007-2008 financial crisis. This paper tries to examine the scope of Shariah indices in offering an opportunity for portfolio diversification. The paper empirically analyzes the existence of volatility contagion among conventional and Shariah indices and delves into the presence of portfolio diversification opportunities among them. The considered sample ranges from 11th July 2008 to 30th July 2018, and includes conventional and Shariah indices of the major economies and regions of the world (USA, Asia, Africa, and Europe). We employ ARDL cointegration and MGARCH family models viz. DCC and BEKK. The results illustrate a clear assortment among Shariah and conventional indices, suggesting an opportunity for portfolio diversification. ARDL models espouse weak cointegration among the indices, particularly during the financial crisis period. Furthermore, the BEKK model also indicates little volatility contagion for this period. The findings of this study are supportive of the argument that Shariah compliant indices offer a feasible and practical opportunity for portfolio diversification. إن عملية التخفيف من المخاطر هي واحدة من اهم الأمور التي تشغل بال المستثمر خلال السنوات التي تلت الأزمة المالية في العام 2007-2008م والتي قد حظيت باهتمامات متجددة. تحاول هذه الورقة البحثية أن تتحرى مجال أحكام الشريعة الإسلامية في تقديم فرصة للتنوع في الحلول و التصورات. تقوم هذه الورقة البحثية بإجراء تحليلات تجريبية بصدد وجود عدوى التقلبات ضمن أحكام الشريعة الإسلامية و الأحكام التقليدية مع إمعان النظر في فرص وجود التنوع في التصورات ضمن تلك الأحكام. لقد اشتملت مديات النماذج التي أُخذت بالاعتبار للفترة 11 تموز/يوليو 2008 – 30 تموز/يوليو 2018م على أحكام للشريعة الإسلامية و أحكام تقليدية لاهم الاقتصادات في مختلف مناطق العالم (أمريكا، آسيا، أفريقيا، وأوروبا). لقد تم استخدام نماذج . لقد أظهرت النتائج تنوعا ملحوظا ضمنBEKK و DCC و التي هي MGARCH Family مع استخدامARDL أحكام الشريعة الإسلامية و الأحكام التقليدية بما يعطي إمكانية وجود فرص للتنوع في التصورات. لقد أظهرت نماذج ضعفا إزاء المشاركة في التكامل ضمن الأحكام المتخذة، و على وجه الخصوص إبان فترة الأزمة المالية. فضلا ARDL مستوى منخفضا من عدوى التقلبات خلال الفترة المذكورة. BEKKعن ذلك فلقد أظهر نموذج لقد كانت النتائج إيجابية و مشجعة إزاء النقاش حول مدى ملاءمة أحكام الشريعة الإسلامية للتكيف بما يقدم فرصة عملية و مجدية للتنوع في الحلول و التصورات.

Suggested Citation

  • Safika Praveen Sheikh & Shafkat Shafi Dar & Sajad Ahmad Rather, 2020. "Volatility Contagion and Portfolio Diversification among Shariah and Conventional Indices: An Evidence by MGARCH Models عدوى التقلبات و تنوع التصورات في أحكام الشريعة الإسلامية والأحكام التقليدية: إثب," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 33(1), pages 35-55, January.
    • Handle: RePEc:abd:kauiea:v:33:y:2020:i:1:no:3:p:35-55
    DOI: 10.4197/Islec.33-1.3
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    More about this item

    Keywords

    Co-integration; Financial crisis; Shariah-compliant index; Volatility spillover. المشاركة في التكامل، الأزمة المالية، ملاءمة أحكام الشريعة الإسلامية للتكيف، احتواء التقلبات.;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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