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Multivariate market risk evaluation between Malaysian Islamic stock index and sectoral indices

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  • Sew Lai Ng
  • Wen Cheong Chin
  • Lee Lee Chong

Abstract

Without an efficient financial risk management, it may cause massive consequences to a financial institution as well as individual. Therefore, developing a methodology which gives precise estimates to reduce the exposure of risk to a minimum is of great importance. This paper uses an asymmetric BEKK-GARCH model to examine the return and volatility linkages between the FTSE Bursa Malaysia Emas Shariah (FBMS) index and the sectoral indices under a normal market. The findings suggest that the FBMS plays a leading role in the mean return spillover effect. There is a strong evidence of significant transmission of past shocks, volatilities and leverage effects are observed on the current conditional variance-covariance in all the pair-wise models. These empirical results are helpful in quantifying the cross-market risk evaluation, risk minimizing weight and cross-market hedge ratio for strategizing appropriate portfolio selection.

Suggested Citation

  • Sew Lai Ng & Wen Cheong Chin & Lee Lee Chong, 2017. "Multivariate market risk evaluation between Malaysian Islamic stock index and sectoral indices," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 17(1), pages 49-61, March.
    • Handle: RePEc:bor:bistre:v:17:y:2017:i:1:p:49-61
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    Cited by:

    1. Sahabuddin, Mohammad & Muhammad, Junaina & Yahya, Mohamed Hisham & Mohammed Shah, Sabarina, 2020. "Co-movements between Islamic and Conventional Stock Markets: An Empirical Evidence," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 54(3), pages 27-40.
    2. Parul Bhatia & Priya Gupta, 2020. "Sub-prime Crisis or COVID-19: A Comparative Analysis of Volatility in Indian Banking Sectoral Indices," FIIB Business Review, , vol. 9(4), pages 286-299, December.
    3. Yousaf, Imran & Yarovaya, Larisa, 2022. "Spillovers between the Islamic gold-backed cryptocurrencies and equity markets during the COVID-19: A sectorial analysis," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).

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