Is Islamic stock index secured against interest rate risk? Evidence from Wavelet analysis
This research is motivated by the desire to see the difference on interest rate risk exposure between Islamic and conventional equity across different investment horizons using wavelet analysis. Seven types of interest rates were tested with FTSE Bursa Malaysia Hijrah Shariah Index and FTSE Bursa Malaysia KLCI Index using data ranging from 1st March 2007 till 31st December 2014. The exposure to interest rate risk for both indices was highest at longer term investment horizon which is between 256 to 512 days; followed by investment horizon between 64-128 days. However, short term investment horizon which is between 2-4 days and 4-8 days has the lowest exposure to interest rate risk. High correlations between indexes across investment horizons had been demonstrated empirically. Hence, the hypothesis that an application of Islamic ethical screen would ‘save’ Islamic finance from interest rate risk is not accepted.
|Date of creation:||25 Jun 2015|
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- Hammoudeh, Shawkat & Mensi, Walid & Reboredo, Juan Carlos & Nguyen, Duc Khuong, 2014. "Dynamic dependence of the global Islamic equity index with global conventional equity market indices and risk factors," Pacific-Basin Finance Journal, Elsevier, vol. 30(C), pages 189-206.
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- Ahdi Noomen Ajmi & Shawkat Hammoudeh & Duc Khuong Nguyen & Soodabeh Sarafrazi, 2013. "How strong are the causal relationships between Islamic stock markets and conventional financial systems? Evidence from linear and nonlinear tests," Working Papers 2013-35, Department of Research, Ipag Business School.
- Hassan, Abul & Antoniou, Antonios & Paudyal, D Krishna, 2005. "Impact Of Ethical Screening On Investment Performance: The Case Of The Dow Jones Islamic Index," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 12, pages 68-97. Full references (including those not matched with items on IDEAS)
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