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Impact of Inclusion into and Exclusion from the Shariah Index on a Stock Price and Trading Volume: An Event Study Approach

Author

Listed:
  • Nawal Seif Kassim

    (Department of Finance, International Islamic University Malaysia, Jalan Gombak, 53100 Kuala Lumpur, Selangor, Malaysia,)

  • Roslily Ramlee

    (Department of Finance, International Islamic University Malaysia, Jalan Gombak, 53100 Kuala Lumpur, Selangor, Malaysia,)

  • Salina Kassim

    (Institute of Islamic Banking and Finance, International Islamic University Malaysia, Jalan Gombak, 53100 Kuala Lumpur, Selangor, Malaysia)

Abstract

Does the inclusion or exclusion from the Shariah index have any effect on the performance of a stock? This study aims to examine the impact of stock inclusion (or exclusion) on the stock prices and trading volume of the firms. Based on the case of selected stocks in Bursa Malaysia, our sample consists of 107 additions and 95 deletions from the Financial Times Stock Exchange Bursa Malaysia EMAS Shariah Index in the period of June 2007 - June 2014. Event study methodology is used to estimate the abnormal returns and abnormal volumes in the days surrounding the announcement and change dates (CDs). The study finds the included stock shows significant and permanent excess returns and abnormal volumes. On the other hand, deleted stocks earn temporary significant negative returns and below normal volumes after the announcement and change dates

Suggested Citation

  • Nawal Seif Kassim & Roslily Ramlee & Salina Kassim, 2017. "Impact of Inclusion into and Exclusion from the Shariah Index on a Stock Price and Trading Volume: An Event Study Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 40-51.
    • Handle: RePEc:eco:journ1:2017-02-06
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    References listed on IDEAS

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    Cited by:

    1. Andrukovich, P., 2019. "The dynamics of stock price during their listing and delisting," Journal of the New Economic Association, New Economic Association, vol. 44(4), pages 50-76.

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    More about this item

    Keywords

    Shariah Screening Methodology; Shariah Compliant Stocks; Shariah Index; Stock Price; Stock Trading;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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