Are Islamic stocks subject to oil price risk exposure?

Ivan Mugarura Tusiime (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)
Man Wang (Dongbei University of Finance and Economics, Dalian, China and China Internal Control Research Center, Dalian, China)

Journal of Risk Finance

ISSN: 1526-5943

Publication date: 18 April 2020

Abstract

Purpose

The purpose of this paper is to examine whether oil price risk is a significant determinant of stock returns.

Design/methodology/approach

Using monthly data on a sample of Islamic stocks listed on the New York Stock Exchanges and National Association of Securities Dealers Automated Quotations System (NASDAQ) over the period from January 1990 to December 2017, the study examines whether oil price risk is a significant determinant of stock returns using Fama–French–Carhart’s four-factor asset pricing model amplified with Brent oil price factor.

Findings

The results from the cross-sectional regression analysis indicate that the extent of the exposure is significantly positive using a full sample period. Moreover, results from size and momentum factors are highly significant whereas book-to-market has no significant impact on Islamic stock returns.

Research limitations/implications

The results support the concept for diversification in equity investment and are thus important for investors, analysts and policymakers.

Originality/value

This study is the first of its kind to establish whether oil price risk is a factor that can determine returns of Islamic listed stocks using the most developed stock market in the world (New York Stock Exchanges and NASDAQ).

Keywords

Citation

Tusiime, I.M. and Wang, M. (2020), "Are Islamic stocks subject to oil price risk exposure?", Journal of Risk Finance, Vol. 21 No. 2, pp. 181-200. https://doi.org/10.1108/JRF-05-2019-0076

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
If you think you should have access to this content, click the button to contact our support team.