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Extreme dependence and risk spillovers between oil and Islamic stock markets

Author

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  • Shahzad, Syed Jawad Hussain
  • Mensi, Walid
  • Hammoudeh, Shawkat
  • Rehman, Mobeen Ur
  • Al-Yahyaee, Khamis H.

Abstract

This paper examines the downside and upside risk spillovers and dependence structure between five Islamic stock markets (the Islamic Market World index, Islamic indices of USA, UK, Japan and the Islamic Financials sector index) which are of paramount importance for faith-oriented investors and particpants in the oil market. The results underscore the presence of time-varying lower tail dependence between the oil and Islamic stock markets. Furthermore, we provide supportive evidence of asymmetric down- and up-side risk spillovers from oil to the Islamic stock markets and vice versa. Finally, these asymmetric risk spillovers have significantly increased after the global financial crisis.

Suggested Citation

  • Shahzad, Syed Jawad Hussain & Mensi, Walid & Hammoudeh, Shawkat & Rehman, Mobeen Ur & Al-Yahyaee, Khamis H., 2018. "Extreme dependence and risk spillovers between oil and Islamic stock markets," Emerging Markets Review, Elsevier, vol. 34(C), pages 42-63.
  • Handle: RePEc:eee:ememar:v:34:y:2018:i:c:p:42-63
    DOI: 10.1016/j.ememar.2017.10.003
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    1. repec:eee:enepol:v:118:y:2018:i:c:p:182-198 is not listed on IDEAS

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    Keywords

    Oil prices; Islamic stock markets; Risk spillovers; Copula; Delta CoVaR;

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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