Islamic equity as an alternative investment from the perspective of the Southeast Asian investors: evidence from MGARCH-DCC and Wavelet Coherence

International diversification of equity is important for investors who want to reduce risk of capital loss. However, international diversification benefit is inconclusive. This research is the initial attempt to find international diversification benefit of global Islamic equity (in the World, US, EU and Asia Pacific region) from the perspective of the conventional Southeast Asian investors. We use relatively advanced and robust techniques MGARCH-DCC and Wavelet coherence. We find that, for the Southeast Asia as a whole region, very-short-term investors have obvious diversification benefit in Islamic equities in World, Europe and US regions but not in Asia Pacific region. Short-term and Medium-term investors face limited diversification benefit, while long-term investors have benefit in Islamic Europe and US equity. Each Southeast Asian country has varying benefit at different investment horizons. The result of this study provides suggestion for the investors who have different investment horizons to effectively diversify their conventional stocks with Islamic equity.