IDEAS home Printed from
   My bibliography  Save this paper

Relationship between regional Shariah stock markets: The cointegration and causality


  • Yildirim, Ramazan
  • Masih, Mansur


This paper investigates the relative importance of the global and regional markets affecting Asian financial market, the cross-market transmission mechanism between the stock markets, and the Asian market responses to the global financial crises in 2008. It’s objective is to answer whether there is a cointegration among the selected 5 regional stock markets – Asia, USA, Europe, BRIC and Arabian; especially their Shariah Indices. In case a cointegration exist, which of the 5 financial markets are the most leader (exogenous) or most follower (endogenous) and whether specifically the Asian market is influenced by this cointegration. Lastly this paper will try to emphasize the implications to the Asian Islamic investors. (e.g. Portfolio Management, Strategic Investment Management). This paper applies the eight steps of time series techniques based on the 5 years daily data, from 04/2008 to 09/2013. Time series econometrics has been selected, since is better than regression approach, because it tested long term theoretical relationship between the variables rather than making any early assumption of such relationship. Empirical results show a long-term equilibrium relationship (co-integration) between the selected 5 Shariah indices. It shows also that the US-, European and the BRIC Sharia Indices are the leading markets compared to the Asian and Arabian Shariah Indices. The causality test show, that especially the Asian Sharia Index is strongly impacted by the other indices and less impacted by the Arabian Shariah Index.

Suggested Citation

  • Yildirim, Ramazan & Masih, Mansur, 2013. "Relationship between regional Shariah stock markets: The cointegration and causality," MPRA Paper 76281, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:76281

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. Franklin Allen & Douglas Gale, 2000. "Financial Contagion," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 1-33, February.
    2. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2003. "The Unholy Trinity of Financial Contagion," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 51-74, Fall.
    3. Wing-Keung Wong & Aman Agarwal & Jun Du, 2005. "Financial Integration for India Stock Market, a Fractional Cointegration Approach," Departmental Working Papers wp0501, National University of Singapore, Department of Economics.
    4. Mansur Masih & Ali Al-Elg & Haider Madani, 2009. "Causality between financial development and economic growth: an application of vector error correction and variance decomposition methods to Saudi Arabia," Applied Economics, Taylor & Francis Journals, vol. 41(13), pages 1691-1699.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Spillover; Asian financial market; Shariah Indices; Financial crisis;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions


    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:pra:mprapa:76281. 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: (Joachim Winter). 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.