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Effects of Political Turmoil (Arab Spring) on Portfolio Diversification Benefits: Perspectives of the Moroccan Islamic Stock investors

Listed author(s):
  • Rahim, Adam Mohamed
  • Masih, Mansur

This study makes the initial attempt to investigate the time varying volatility and return linkages of Moroccan Islamic stock indices with the market and regional based indices especially during times of political unrest. More specifically, we use the Dow Jones Islamic Developed markets and Emerging markets indices to represent the market based indices, whereas Dow Jones Islamic Europe and Dow Jones Islamic Asia Pacific were used to represent regional based indices. In an attempt to unravel the time-varying nature of these co-movements, the MGARCH-DCC which is one of the recent research methodologies was adopted and applied on daily data covering from June 2007 to December 2012. From the discovered results, it is seen that the Moroccan Islamic investors may derive benefits from portfolio diversification across stock markets of Developed markets and the Asia Pacific market especially during times when there is no political unrest. The findings obtained under this study are crucial for understanding the role of political uncertainty on the stability of the stock market and is of great interest to investors especially the Islamic ones.

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File URL: https://mpra.ub.uni-muenchen.de/58832/1/MPRA_paper_58832.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 58832.

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Date of creation: 25 Aug 2014
Handle: RePEc:pra:mprapa:58832
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  1. Abou-Zaid, Ahmed S., 2011. "Volatility Spillover Effects in Emerging MENA Stock Markets," Review of Applied Economics, Review of Applied Economics, vol. 7(1-2).
  2. Chau, Frankie & Deesomsak, Rataporn & Wang, Jun, 2014. "Political uncertainty and stock market volatility in the Middle East and North African (MENA) countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 28(C), pages 1-19.
  3. Ahmed El Ghini & Youssef Saidi, 2017. "Return and volatility spillovers in the Moroccan stock market during the financial crisis," Empirical Economics, Springer, vol. 52(4), pages 1481-1504, June.
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  7. Janakiramanan, Sundaram & Lamba, Asjeet S., 1998. "An empirical examination of linkages between Pacific-Basin stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(2), pages 155-173, June.
  8. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
  9. Robert Engle, 2001. "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 157-168, Fall.
  10. Tse, Y K & Tsui, Albert K C, 2002. "A Multivariate Generalized Autoregressive Conditional Heteroscedasticity Model with Time-Varying Correlations," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 351-362, July.
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