IDEAS home Printed from
   My bibliography  Save this paper

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


  • 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.

Suggested Citation

  • Mehmet Balcilar & Charl Jooste & Shawkat Hammoudeh & Rangan Gupta & Vassilios Babalos, 2014. "Are there Long-Run Diversification Gains from the Dow Jones Islamic Finance Index?," Working Papers 15-20, Eastern Mediterranean University, Department of Economics.
  • Handle: RePEc:emu:wpaper:15-20.pdf

    Download full text from publisher

    File URL:
    File Function: First version, 2014
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    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.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:ipg:wpaper:2014-604 is not listed on IDEAS
    2. repec:ipg:wpaper:2014-581 is not listed on IDEAS
    3. 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.
    4. repec:ipg:wpaper:2014-531 is not listed on IDEAS
    5. repec:ipg:wpaper:2014-599 is not listed on IDEAS
    6. repec:ipg:wpaper:2014-505 is not listed on IDEAS

    More about this item


    Islamic and conventional finance; time-varying cointegration;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:emu:wpaper:15-20.pdf. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mehmet Balcilar). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.