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Are there Long-Run Diversification Gains from the Dow Jones Islamic Finance Index?

Listed author(s):
  • Mehmet Balcilar

    ()

    (Department of Economics, Eastern Mediterranean University)

  • Charl Jooste

    ()

    (Department of Economics, University of Pretoria)

  • Shawkat Hammoudeh

    ()

    (Lebow College of Business, Drexel University, Philadelphia, PA, USA)

  • Rangan Gupta

    ()

    (Department of Economics,University of Nevada)

  • Vassilios Babalos

    ()

    (Department of Accounting & Finance, Technological Educational Institute of Peloponnese, Greece)

We compare nonlinear cointegration tests with the standard cointegration tests in studying the relationship of the Dow Jones Islamic finance index with three other conventional 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. Our findings rely on a battery of standard tests as well as on the Bierens and Martins (2010) test that investigates time-varying coefficient cointegration in a multivariate system. Islamic markets seem to offer little, if any, long-run diversification to international investors.

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File URL: http://repec.economics.emu.edu.tr/RePEc/emu/wpaper/15-20.pdf
File Function: First version, 2014
Download Restriction: no

Paper provided by Eastern Mediterranean University, Department of Economics in its series Working Papers with number 15-20.

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Length: 8 pages
Date of creation: 2014
Handle: RePEc:emu:wpaper:15-20.pdf
Contact details of provider: Phone: 90 (392) 630-1291
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Web page: http://economics.emu.edu.tr/

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  1. Nasr, Adnen Ben & Lux, Thomas & Ajmi, Ahdi Noomen & Gupta, Rangan, 2016. "Forecasting the volatility of the Dow Jones Islamic Stock Market Index: Long memory vs. regime switching," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 559-571.
  2. Vasco Gabriel & Luis Martins, 2011. "Cointegration tests under multiple regime shifts: An application to the stock price–dividend relationship," Empirical Economics, Springer, vol. 41(3), pages 639-662, December.
  3. Saban Nazlioglu & Shawkat Hammoudeh & Rangan Gupta, 2015. "Volatility transmission between Islamic and conventional equity markets: evidence from causality-in-variance test," Applied Economics, Taylor & Francis Journals, vol. 47(46), pages 4996-5011, October.
  4. R.K. Kaundal & Sanjeet Sharma, 2010. "Stock Market Integration," Foreign Trade Review, , vol. 45(3), pages 3-18, October.
  5. Bierens, Herman J. & Martins, Luis F., 2010. "Time-Varying Cointegration," Econometric Theory, Cambridge University Press, vol. 26(05), pages 1453-1490, October.
  6. Park, Joon Y. & Hahn, Sang B., 1999. "Cointegrating Regressions With Time Varying Coefficients," Econometric Theory, Cambridge University Press, vol. 15(05), pages 664-703, October.
  7. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
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