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Adaptive markets hypothesis for Islamic stock indices: Evidence from Dow Jones size and sector-indices

Author

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  • Amélie Charles

    (Audencia Business School - Audencia Business School)

  • Olivier Darné

    (IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes)

  • Jae Kim

    (La Trobe University [Melbourne])

Abstract

This paper analyzes the degree of return predictability (or weak-form informational efficiency) of Dow Jones Islamic and conventional size and sector-indices using the data from 1996 to 2013. Employing the automatic portmanteau and variance ratio tests for the martingale difference hypothesis of asset returns, we find that all Islamic and conventional sub-index returns have been predictable in a number of periods, consistent with the implications of the adaptive markets hypothesis. Overall, the Islamic sector-indices exhibit a higher degree of informational efficiency than the conventional ones, especially in the Consumer Goods, Consumer Services, Financials and Technology sectors. We also find that the Islamic sub-indices tend to be more efficient than the conventional ones during crisis periods.

Suggested Citation

  • Amélie Charles & Olivier Darné & Jae Kim, 2017. "Adaptive markets hypothesis for Islamic stock indices: Evidence from Dow Jones size and sector-indices," Post-Print hal-01579718, HAL.
  • Handle: RePEc:hal:journl:hal-01579718
    DOI: 10.1016/j.inteco.2017.05.002
    Note: View the original document on HAL open archive server: http://hal-audencia.archives-ouvertes.fr/hal-01579718
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    References listed on IDEAS

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    1. repec:eee:finana:v:56:y:2018:i:c:p:167-180 is not listed on IDEAS

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    Keywords

    Return predictability; Wild bootstrap; Islamic indices; Market efficiency; Martingale difference hypothesis;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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