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Portfolio selection in Asia/Pacific region-Islamic markets

Muhammad Hanif (College of Business Administration, Ajman University, Ajman, United Arab Emirates)

Journal of Islamic Accounting and Business Research

ISSN: 1759-0817

Article publication date: 29 January 2020

Issue publication date: 2 April 2020




Islamic capital markets, i.e. ICMs, featured as socially responsible investments, less levered and more reflective of the real sector, are a recent development in financial markets showing an impressive growth and offering the potential for portfolio diversification benefits. The purpose of this study is to understand the long-run integration of ICMs in the Asia/Pacific region.


This sample includes ICMs of Asia/Pacific region (such as Pakistan, India, China, Japan, Thailand, Malaysia and Indonesia) for 280 weeks between 2011 and 2016. Selected indexes are FTSE Islamic except for Pakistan and Indonesia. Evidence was obtained through the application of correlation, unit root, Johansen cointegration and Granger causality tests.


This study documents the results of the integration of ICMs based on developmental stage, geographic location, economic cooperation and shared religious beliefs/civilization. Partial support was observed for all hypotheses: integration of markets based on economic grouping, location, economic treaties and shared civilization. The Japanese market was the most integrated, while the Indian and Malaysian markets are the least. Evidence supports the shift of leadership role from advanced markets to emerging markets.

Practical implications

Selected diversification opportunities are available for global Islamic as well as conventional investors. This study recommends closer cooperation among Muslim majority countries of the region, as well as the effective use of economic cooperation treaties for joint economic growth and prosperity.


This study contributes to the literature by providing evidence on the integration of ICMs in an economically important region (Asia/Pacific) that is witnessing an increasing role in the global gross domestic product and international trade.



Hanif, M. (2020), "Portfolio selection in Asia/Pacific region-Islamic markets", Journal of Islamic Accounting and Business Research, Vol. 11 No. 4, pp. 905-928.



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