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Are there long-run diversification gains from the Dow Jones Islamic finance index?

Author

Listed:
  • Mehmet Balcilar
  • Charl Jooste
  • Shawkat Hammoudeh
  • Rangan Gupta
  • Vassilios Babalos

Abstract

We compare a nonlinear (time-varying) cointegration test with the standard cointegration test in studying the long-run relationship of the Dow Jones Islamic finance index with three other conventional global equity market indices. Our results show that there is a long-run nonlinear cointegrating relationship between the Dow Jones Islamic stock market index and other conventional stock market indices, which is not picked up by the linear cointegration test. Thus, Islamic markets seem to offer little, if any, long-run diversification to international investors.

Suggested Citation

  • Mehmet Balcilar & Charl Jooste & Shawkat Hammoudeh & Rangan Gupta & Vassilios Babalos, 2015. "Are there long-run diversification gains from the Dow Jones Islamic finance index?," Applied Economics Letters, Taylor & Francis Journals, vol. 22(12), pages 945-950, August.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:12:p:945-950
    DOI: 10.1080/13504851.2014.990613
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    Cited by:

    1. Camgöz, Mevlüt & Topal, Mehmet Hanefi, 2022. "Identifying the asymmetric price dynamics of Islamic equities: Implications for international investors," Research in International Business and Finance, Elsevier, vol. 60(C).
    2. Mensi, Walid & Rehman, Mobeen Ur & Maitra, Debasish & Al-Yahyaee, Khamis Hamed & Vo, Xuan Vinh, 2023. "Frequency spillovers and portfolio risk implications between Sukuk, Islamic stock and emerging stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 139-157.
    3. Karim, Muhammad Mahmudul & Kawsar, Najmul Haque & Ariff, Mohamed & Masih, Mansur, 2022. "Does implied volatility (or fear index) affect Islamic stock returns and conventional stock returns differently? Wavelet-based granger-causality, asymmetric quantile regression and NARDL approaches," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 77(C).
    4. Ahmed, Walid M.A., 2019. "Islamic and conventional equity markets: Two sides of the same coin, or not?," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 191-205.
    5. Yanhua Chen & Rosario N Mantegna & Athanasios A Pantelous & Konstantin M Zuev, 2018. "A dynamic analysis of S&P 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates," PLOS ONE, Public Library of Science, vol. 13(3), pages 1-40, March.
    6. Jean-Michel Sahut & Mehdi Mili & Maroua Ben Krir & Frédéric Teulon, 2015. "Factors of Competitiveness of Islamic Banks in the New Financial Order," Working Papers 2015-625, Department of Research, Ipag Business School.
    7. Charfeddine, Lanouar & Benlagha, Noureddine & Maouchi, Youcef, 2020. "Investigating the dynamic relationship between cryptocurrencies and conventional assets: Implications for financial investors," Economic Modelling, Elsevier, vol. 85(C), pages 198-217.
    8. repec:ipg:wpaper:2014-604 is not listed on IDEAS
    9. repec:ipg:wpaper:2014-581 is not listed on IDEAS
    10. repec:ipg:wpaper:2014-531 is not listed on IDEAS
    11. repec:ipg:wpaper:2014-599 is not listed on IDEAS
    12. repec:ipg:wpaper:2014-505 is not listed on IDEAS
    13. repec:ipg:wpaper:2014-487 is not listed on IDEAS
    14. Delle Foglie, Andrea & Panetta, Ida Claudia, 2020. "Islamic stock market versus conventional: Are islamic investing a ‘Safe Haven’ for investors? A systematic literature review," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).

    More about this item

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G1 - Financial Economics - - General Financial Markets

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