Search results

This paper aims to examine the performance of Islamic and conventional stocks listed at the Pakistan Stock Exchange by using both parametric and non-parametric approaches. The motivation is to do risk-return analysis of Islamic stock prices and conventional stock prices.

It uses various measures of performance, e.g. Sharpe ratio, Treynor ratio, Jensen's alpha, beta, generalized auto-regressive conditional heteroskedasticity and stochastic dominance. Using the Karachi Meezan Index-30 (KMI-30) and the Karachi Stock Exchange Index-30 (KSE-30) as proxies for Islamic and conventional stock prices, respectively, it examines the performance of Islamic and conventional stocks. The daily data of KMI-30 and KSE-30, covering period from June 9, 2009 to June 20, 2020 are used.

The results show that the overall KMI-30 outperforms the KSE-30. The returns of the KMI-30 are greater than the KSE-30. However, the risk and volatility of the KMI-30 and KSE-30 are similar. Further, the KMI-30 has higher excess returns per unit of total risk than the KSE-30. But both indexes have similar excess returns per unit of systematic risk. Moreover, the KMI-30 returns have stochastically dominance over the KSE-30 returns. These results reveal that the Islamic index performs better than the conventional index.

The findings provide several practical implications in financial and investment decisions making by investors, managers and policymakers such as strategies for asset allocation and investment. Further, in risk management, it provides guidance for allocating portfolios and managing risk. The investment in Islamic stocks may mitigate potential risk within asset portfolios.

This research is unique in its approach to the analysis of the performance comparison of conventional and Islamic stock by using comprehensive parametric and non-parametric estimation techniques. Such research has not been undertaken in the Pakistan's equity market since.

This paper aims to investigate the risk-return and volatility spillover within the Tunisian stock market during the COVID-19 pandemic analyzing both the Islamic and conventional stocks’ performance.

Both symmetric (GARCH and GARCH-M) and asymmetric (Threshold GARCH and Exponential GARCH) models are used to analyze the market returns and volatility response. Standard and Poor’s (S&P) index has been used to test both the Islamic and conventional stocks within the Tunisian stock market.

The findings suggest that both Tunisia Islamic and conventional stock markets are highly persistent; however, the conventional stock index showed a negative return spillover on the Islamic stocks during the pandemic. The conventional stock index has also shown a higher exposure to risk for a lower amount of return, and evidence of potential diversification benefit between both indexes was found during the pandemic, whereas the Islamic market showed a positive leverage effect, indicating a positive correlation between past return and future return; the conventional index implied a negative leverage effect.

The value of this paper emerges in studying three main aspects that are specific to the Tunisian stock market. This includes COVID-19 effect of return spillovers, volatility transmission across both conventional and Islamic stock market within the local financial market.

The purpose of this paper is to investigate whether Islamic stock indexes outperform conventional stock indexes, in terms of informational efficiency and risk, during the recent financial instability period.

The paper uses a state space model combined with a standard GARCH(1,1) specification while taking into account structural breakpoints. The authors allow for efficiency and volatility spillovers to be time-varying and consider break dates to locate periods of financial instability.

Empirical results show that Islamic stock indexes are more volatile than their conventional counterparts and are not totally immune to the global financial crisis. As regards of the informational efficiency, the results show that the Islamic stock indexes are more efficient than the conventional stock indexes.

Resulting evidence of this paper has several implications for international investors who wish to invest in Islamic and/or conventional stock markets. Policy makers and even academics and Sharias researchers should as well take preventive measures in order to ensure the stability of Islamic stock markets during turmoil periods. Overall, prudent risk management and precocious financial practices are relevant and crucial for both Islamic and conventional financial markets.

The originality of this study is performed by the use of time-varying models for volatility spillovers and informational efficiency. It considers structural break dates that think about the dynamic effect of informational flows on stock markets. The study was developed in a global framework using international data. The global analysis allows avoiding country specific effects.

The purpose of this paper is to quantify the extent to which the Malaysia-based equity investors can benefit from diversifying their portfolio into the conventional and Islamic Southeast Asian region and the world’s top ten largest equity indices (China, Japan, Hong Kong, India, the UK, the USA, Canada, France, Germany and Switzerland).

The multivariate GARCH-dynamic conditional correlation is deployed to estimate the time-varying linkages of the selected conventional and Islamic Asian and international stock index returns with the Malaysian stock index returns, covering approximately eight years daily starting from 29 June 2007 to 30 June 2016.

In general, in terms of volatility, the results indicate that both Asian and international Islamic stock indices are more or less volatile than its conventional counterparts. From the correlation analysis, we can see that both the conventional and Islamic MSCI indices of Japan provide more diversification benefits compared to Southeast Asian region, China, Hong Kong and India. Meanwhile, in terms of international portfolio diversification, the results tend to suggest that both the conventional and Islamic MSCI indices of the USA provide more diversification benefits compared to the UK, Canada, France, Germany and Switzerland.

The findings of this paper may have several significant implications for the Malaysia-based equity investors and fund managers who seek for the understanding of return correlations between the Malaysian stock index and the world’s largest stock market indices in order to gain higher risk-adjusted returns through portfolio diversification. With regard to policy implications, the findings on market shocks and the extent of the interdependence of the Malaysian market with cross-border markets may provide some useful insights in formulating effective macroeconomic stabilization policies in the efforts of preventing contagion effect from deteriorating the domestic economy.

This paper aims to compare two groups of stocks to analyze the efficiency of an ethical portfolio in comparison with a conventional portfolio.

Efficiency test by second-order stochastic dominance (SSD) approach is applied on two groups, which consist of 12 stocks. Ethical portfolio is chosen from the stocks complying with the participation banking rules. Conventional portfolio is selected from Borsa Istanbul (BIST) with choosing the corresponding stocks for each ethical stock according to the sector and market capitalization. All the stocks of both groups are pairwise SSD compared.

Both groups of 12 stocks are inefficient portfolios; however, a group of 7 stocks constitute an efficient ethical portfolio with the total weight of 50.82 per cent among the set of 12 ethical stocks. On the other hand, a group of 6 stocks constitute an efficient conventional portfolio, with the total weight of 45.16 per cent among the set of 12 conventional stocks. By pairwise SSD comparison of corresponding stocks from both groups, despite none of the conventional stocks dominate ethical stocks, four ethical stocks dominated the conventional ones.

Back-testing and comparison with benchmark BIST 100 Index have been done for the selected portfolios. According to back-testing results, groups of SSD efficient stocks outperformed the groups, from which they were selected. Furthermore, both SSD efficient portfolios have higher returns than benchmark index, BIST 100.

This study aims to investigate Malaysian stock market efficiency from the view of Sharīʿah-compliant and conventional stocks based on the effectiveness of technical trading strategies.

This study uses unconventional trading strategies that mix buy recommendations of Bursa Malaysia analysts with sell signals generated from 10 selected technical trading strategies (simple moving average, moving average envelopes, Bollinger Bands, momentum, commodity channel index, relative strength index, stochastic, Williams percentage range, moving average convergence divergence oscillator and shooting star) that are detected using ChartNexus. The period from 1 January 2013 until 31 December 2015 produces a total sample consisting of 1,265 buy recommendations of 125 Sharīʿah-compliant stocks and 400 buy recommendations of conventional stocks. The study period is extended until 31 March 2016 to provide an ample time for detecting the sell signal especially for buy recommendations that are released towards the end of 2015.

The resulting Jensen’s alpha show 8 out of 10 strategies are effective in generating abnormal returns in Sharīʿah-compliant samples while only 3 out of 10 strategies are effective in conventional samples. Prominent effectiveness of technical trading strategies in Sharīʿah-compliant stocks implies clear inefficiency in that stock market segment as opposed to those of the conventional stocks.

The results based on unconventional trading strategies provide new insights of Malaysian stock market efficiency especially in Sharīʿah-compliant and conventional stocks. The paper provides more robust findings on market efficiency as firms’ equity level data were focussed together with analysts’ buy recommendations from Bursa Malaysia.

This study aims to investigate the dependence structure and volatility spillovers among two strategic commodities (crude oil and gold) and a set of Islamic and conventional regional stock market indices, while examining the Ramadan effect

The empirical strategy consists of two complementary measures of dependence and connectedness. This study first uses copulas to examine the dependency between the markets considered, then spillovers compute the magnitude of the connectedness among them.

The copulas analysis shows that Frank’s copula appears to better capture the relationship between most asset returns and highlights the almost absence of extreme dependence and, therefore, the existence of diversification opportunities. Moreover, the connectedness analysis suggests that gold is a net volatility receiver and provides, thereby, greater diversification benefits compared to crude oil. In addition, the high levels of time-varying connectedness support strong integration among the financial markets studied, specifically during the COVID-19 crisis period. Furthermore, the connectedness among the markets studied increases during the Ramdan subperiods, supporting shift contagion among financial markets considered during this religious holiday.

The results provide investors with a better understanding of the nature as well as the magnitude of the interdependences between commodity markets and a set of Islamic and conventional regional stock markets. Indeed, it is of paramount importance for investors to clearly understand how Islamic and conventional markets are segmented or integrated during stress and stress-free periods, as well as the effect of the month of Ramadan on the interdependence among markets, to better assess risks, diversify portfolios and implement more effective hedging strategies.

While a considerable body of literature examines financial contagion and volatility transmission between financial markets, there is still much to be said regarding connectedness among commodity and stock markets, particularly when it comes to studying the effects of religious holidays on the interaction between conventional and Islamic assets. This paper fills in this gap by focusing on the dependence structure as well as the connectedness between Islamic stock indices, conventional stock indices, gold and crude oil for six different regions, while examining the Ramadan effect.

The purpose of this paper is to test the weak form of the efficient market hypothesis (EMH) using monthly data from 2004M08 to 2018M04 for two Canadian stock indices: the Islamic (DJICPI) and the conventional (CCSI). This paper investigates whether Islamic and/or conventional stock market would be efficient through the non-stationarity test of the stock indices.

The authors conduct the linearity test of Harvey et al. (2008) to identify whether the considered series has linear or nonlinear behavior. If the time series exhibits nonlinear evolution, then the authors apply nonlinear unit root tests (three KSS type tests and Sollis tests).

Linearity test results say that LCCSI has nonlinear behavior, while Dow Jones Islamic Canadian Price Index, LDJICPI, is a linear process. Then, the findings of this paper show that only Canadian Islamic Price Index (DJICPI) has the characteristics of random walk indicating that only conventional stock markets are inefficient. The major implication is that in Canada, fund managers and investors can (cannot) enjoy excess returns to their investment in conventional (Islamic) stock market.

Numerous empirical studies of the weak EMH are carried out within a linear framework. However, stock indices can show nonlinear behavior as a result of 2008 global financial crisis. To contribute to the existing literature on the Islamic and conventional stock market efficiency, the authors take into account both structural breaks and nonlinearity. Thus, as a testing strategy for weak EMH, the authors perform (Harvey et al., 2008) linearity test to examine the presence of nonlinear behavior and correct for outliers effect when it is needed.

In this study, the authors evaluate seven calendar anomalies’–the day of the week, weekend, the month of the year, January, the turn of the month (TOM), Ramadan and Eid festivals–effects in both the conventional and Islamic stock indices of Bangladesh. Also, the authors examine whether these anomalies differ between the two indices.

The authors select the Dhaka Stock Exchange (DSE) Broad Index (DSEX) and the DSEX Shariah Index (DSES) of the DSE as representatives of the conventional and Islamic stock indices respectively. To carry out the investigation, the authors employ the generalized autoregressive conditional heteroskedasticity (GARCH) typed models from January 25, 2011, to March 25, 2020.

The study’s results indicate the presence of all these calendar anomalies in either conventional or Islamic indices or both, except for the Ramadan effect. Some significant differences in the anomalies between the two indices (excluding the Ramadan effect) are detected in both return and volatility, with the differences being somewhat more pronounced in volatility. The existence of these calendar anomalies argues against the efficient market hypothesis of the stock markets of Bangladesh.

The study’s results can benefit investors and portfolio managers to comprehend different market anomalies and make investment strategies to beat the market for abnormal gains. Foreign investors can also be benefited from cross-border diversifications with DSE.

To the authors’ knowledge, first the calendar anomalies in the context of both conventional and Islamic stock indices for comparison purposes are evaluated, which is the novel contribution of this study. Unlike previous studies, the authors have explored seven calendar anomalies in the Bangladesh stock market's context with different indices and data sets. Importantly, no study in Bangladesh has analyzed calendar anomalies as comprehensively as the authors’.

This study aims to investigate the transmission of shock between the oil market and the Islamic and conventional stock markets of the Gulf Cooperation Council (GCC) countries during the oil shocks of 2008 and 2014.

This study uses two models. First, the dynamic conditional correlation–generalized autoregressive conditionally heteroskedastic model has been used to capture the fundamental contagion effects between the oil market and the Islamic and conventional stock markets during the tranquil and turmoil-crisis periods of 2008-2014. Second, the filter of Kalman has been used to capture the effects of pure contagion between the oil market and the GCC Islamic and conventional stock markets. The authors analyze the dynamic correlation between forecasting errors of oil returns and stock returns of GCC Islamic and GCC conventional indices.

The main findings of this investigation are: first, the estimation of the dynamic conditional correlation– generalized autoregressive conditionally heteroskedastic model for oil market and the Islamic and conventional stock markets proves that the Islamic and conventional stock markets and oil market displayed a significant increase in the dynamic correlation during the turmoil period, from mid-2008 and mid-2014. This proves the existence of contagion between the markets studied. Second, the authors analyze the dynamic correlation between forecasting errors of oil returns and stock returns of GCC Islamic and GCC conventional indices. They show a strong increase in the correlation coefficients between the oil market and the conventional GCC stock markets, and between the conventional and Islamic GCC stock markets during the oil crisis of 2014. However, there is no change in regime in the figure of the correlation coefficient between the oil market and the GCC Islamic stock markets during the 2008 financial crisis. This pure contagion is mainly attributed to the herding bias in 2014 oil crisis.

This study contributes to identifying the contribution of herding bias on the volatility transmission between the oil markets, and the GCC Islamic and conventional stock market, especially during two controversial shocks: the 2008 oil-price increase and the 2014 oil drop.