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Sharia compliant gold investment in Malaysia: Hedge or safe haven?

Author

Listed:
  • Ghazali, Mohd Fahmi
  • Lean, Hooi Hooi
  • Bahari, Zakaria

Abstract

This paper studies the hedge and safe haven characteristics of Sharia compliant gold in Malaysia. Specifically, we would like to know whether the official gold and gold account traded, which complies with Islamic principles, can be used as a hedge or a safe haven for the Malaysian market. To answer this question, we examine both constant and time-varying relations between domestic stock and gold returns. The notable finding is that the official gold standard of Malaysia can act as a strong hedge relative to the use of the Islamic gold account. On the other hand, the domestic gold, in particular the Islamic gold account, does not perform attractively as a safe haven during the episodes of extreme drops in stock market. These findings show that gold does not play a major role during the stock market declines in Malaysia. Nevertheless, we note that the official gold standard performs better than the gold account.

Suggested Citation

  • Ghazali, Mohd Fahmi & Lean, Hooi Hooi & Bahari, Zakaria, 2015. "Sharia compliant gold investment in Malaysia: Hedge or safe haven?," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 192-204.
  • Handle: RePEc:eee:pacfin:v:34:y:2015:i:c:p:192-204
    DOI: 10.1016/j.pacfin.2014.12.005
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hoang, Thi-Hong-Van & Wong, Wing-Keung & Zhu, Zhenzhen, 2015. "Is gold different for risk-averse and risk-seeking investors? An empirical analysis of the Shanghai Gold Exchange," Economic Modelling, Elsevier, vol. 50(C), pages 200-211.
    2. repec:eee:mulfin:v:42-43:y:2017:i::p:152-163 is not listed on IDEAS
    3. repec:arp:tjssrr:2018:p:214-224 is not listed on IDEAS
    4. repec:gam:jijfss:v:5:y:2017:i:3:p:18-:d:108542 is not listed on IDEAS
    5. repec:eee:pacfin:v:54:y:2019:i:c:p:13-28 is not listed on IDEAS
    6. El khamlichi, Abdelbari & HOANG, Thi Hong Van & Wong, Wing-Keung, 2017. "Is Gold Different for Islamic and Conventional Portfolios? A Sectorial Analysis," MPRA Paper 76282, University Library of Munich, Germany.
    7. Ibrahim, Mansor H., 2015. "Issues in Islamic banking and finance: Islamic banks, Shari’ah-compliant investment and sukuk," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 185-191.
    8. Low, Rand Kwong Yew & Yao, Yiran & Faff, Robert, 2016. "Diamonds vs. precious metals: What shines brightest in your investment portfolio?," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 1-14.

    More about this item

    Keywords

    Gold; Hedge; Safe haven; Sharia; Malaysia;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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