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11 – 20 of over 16000The purpose of this paper is to investigate the global influence of crude and refined oil futures prices on Dow Jones Islamic equity indices (DJIMI) during the recent global…
Abstract
Purpose
The purpose of this paper is to investigate the global influence of crude and refined oil futures prices on Dow Jones Islamic equity indices (DJIMI) during the recent global financial crisis under structural breaks in the conditional volatility of oil futures prices.
Design/methodology/approach
It aims at exploring the long-run and the short-run elasticity and causal relationships using an ARDL bound testing approach and a vector error correction model.
Findings
The main findings confirm the presence of long-run relationship for DJIM emerging markets index compared to other global and sub-regional developed indexes. Speed of adjustment to the long-run equilibrium is moderate and the effect of structural breaks, produced from nonlinear volatility model with long memory (LM), is overall not pronounced for that relationship. Short-run causality is bi-directional but long-run Granger causality does not run from refined oil to the DJIMI and crude oil.
Research limitations/implications
The paper demonstrates the implicit extent of international financial integration of Islamic stock markets in light of the global influence of oil prices.
Practical implications
The findings offer some highlights to researchers, portfolio managers and policymakers.
Originality/value
The paper gives an answer to an identified need to test the position of Islamic equity markets as booming Islamic investment and socially responsible investment areas to the global influence of the new soaring path of oil markets. It uses as well bounds testing approach and tests weak and strong causalities under structural breaks. It considers as well LM behavior in oil prices along with the asymmetry property in oil prices.
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Jaizah Othman, Mehmet Asutay and Norhidayah Jamilan
This paper aims to provide an empirical evidence on the fund flows-past return performance relationship by also considering the management expense ratio, the portfolio turnover…
Abstract
Purpose
This paper aims to provide an empirical evidence on the fund flows-past return performance relationship by also considering the management expense ratio, the portfolio turnover, the fund size and the fund age of Islamic equity funds (IEF) investors in comparison with conventional equity funds (CEF) investors.
Design/methodology/approach
By using panel data, the sample of Malaysian domestic managed equity funds is considered which comprises 20 individual funds from IEF and CEF from 2011 to 2013.
Findings
The results provide evidence that IEF investors have different factors when choosing funds in comparison with CEF investors. The study finds that the key factor influencing the fund flows of IEF is the management expense ratio, compared to the CEF which is fund size. This study also shows that all the fund characteristics of IEF and CEF are positively or negatively related to the fund flows.
Research limitations/implications
The present study may be extended by considering other fund categories such as the money market fund, the balanced fund, the bond fund and the fixed income fund.
Practical implications
The empirical findings of this paper clearly call for fund managers and investors to review their investment policy. The results could also provide better information and guidance for investors as well policy makers on the factors that affect the fund flow for Malaysian Islamic funds and CEF.
Originality/value
This paper is among the earliest empirical evidence studies on the fund flows-past return performance relationship by focusing in a comparative manner on IEF investors and CEF investors in Malaysia.
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Ivelina Pavlova, Jeff Whitworth and Maria E. de Boyrie
This study explores the “Sell-in-May” effect in environmental, social and governance (ESG) indices and compares the seasonal effects in ESG equity indices with conventional equity…
Abstract
Purpose
This study explores the “Sell-in-May” effect in environmental, social and governance (ESG) indices and compares the seasonal effects in ESG equity indices with conventional equity indices.
Design/methodology/approach
The authors use ordinary least squares (OLS) models and M-estimation as a robustness check, as OLS estimates may be sensitive to outliers. The authors also employ bootstrap simulations to use the data efficiently and to test whether seasonal trading strategies can produce abnormal returns.
Findings
The regression results reveal that seasonal effects in USA ESG equity indices are similar to those in conventional equity indices. Higher returns are noticeable from November through April, mainly in ESG indices including small and medium capitalization stocks. When the authors extend the Sell-in-May strategy from October through April, the authors find that the seasonal effect is significant for multiple ESG indices, even after accounting for the January effect. Bootstrap simulations show that the Sell-in-May and Extended Sell-in-May strategies appear to beat a buy-and-hold strategy on a risk-adjusted basis and that this result is stronger in medium and small capitalization ESG indices.
Originality/value
Although previous research has considered the effectiveness of seasonal equity trading strategies and the general performance of ESG stocks, this is the first study to specifically examine the “Sell in May” effect in ESG indices. The authors also consider an “Extended” Sell-in-May strategy where stocks are purchased one month earlier and show that the strategy produces higher returns.
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Sezer Bozkuş Kahyaoğlu and Hilmi Tunahan Akkuş
Introduction – The rapid flow of information between the markets eliminates the possibility of diversifying the portfolio by bringing the markets closer, and may cause the…
Abstract
Introduction – The rapid flow of information between the markets eliminates the possibility of diversifying the portfolio by bringing the markets closer, and may cause the volatility in a market to spread to another market. In this context, revealing the relationships between conventional and participation markets or financial assets is important in terms of portfolio diversification and risk management.
Purpose – The major aim of this work is to analyse the existence of volatility spillover between conventional stock index and participation index based on the indexes in Turkish Capital Markets. BIST-30 and Katılım-30 indexes are used as the representatives of conventional stock index and participation index, respectively.
Methodology – Firstly, the univariate HYGARCH (1,d,1) parameters are calculated, and secondly, the dynamic equicorrelation (DECO) methodology is applied. DECO model is proposed to simplify structural assumptions by introducing a structure in which all twosomes of returns take the same correlation for a given time period. In this way, DECO model enables to have an optimal portfolio selection in comparison to an unrestricted time varying-dynamic correlation approaches and gives more advanced forecasting ability for the duration of the financial crisis periods compared to the various portfolios.
Findings – There is a strong correlation between BIST-30 and Katılım-30. They are affected by the same shocks. We expect to see different investor behaviours for Katılım-30 and BIST-30. However, they seem to have almost the same investor profile. In addition, there is a causality in both ways and volatility spillover between them.
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This study aims to investigate the volatility of conventional and Islamic indices and to explore the impact of the global financial crisis toward the volatility of both markets in…
Abstract
Purpose
This study aims to investigate the volatility of conventional and Islamic indices and to explore the impact of the global financial crisis toward the volatility of both markets in Malaysia.
Design/methodology/approach
The data consist of financial times stock exchange group (FTSE) Bursa Malaysia Kuala Lumpur Composite Index and FTSE Bursa Malaysia Hijrah-Shari‘ah Index covering the period January 2008-October 2014. Generalized autoregressive conditional heteroskedasticity is used to find the volatility of the two markets and an ordinary least square model is then used to investigate the impact of the crisis toward the volatility of those markets.
Findings
Interestingly, the result shows that Islamic index is less volatile during the crisis compared to the conventional index. Furthermore, the crisis is proven to significantly affect the volatility of conventional index in the short run and Islamic index in the long run.
Originality/value
This study explores the volatility–financial crisis nexus, especially for the Islamic financial markets, which to the best of the author’s knowledge, is still lacking empirical research which may improve the understanding upon this issue.
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Fatma Alahouel and Nadia Loukil
This paper aims to investigate the financial uncertainty vary according to different financial assets type: conventional and Islamic.
Abstract
Purpose
This paper aims to investigate the financial uncertainty vary according to different financial assets type: conventional and Islamic.
Design/methodology/approach
Common factors are related to risk or known information. For this, the authors use general dynamic factor model to extract common variation between both types of indexes. Then they calculate stochastic volatility for each idiosyncratic component. They also carry out the study on three different family indexes respectively, Dow Jones, S&P and MSCI indexes, for the period going from January 1, 2008 to June 30, 2018. Through a comparison analysis with uncertainty index designed for conventional assets, the authors examine the similarity between the two indexes via mean, median and variance tests. They decrypt the interrelation between them by using OLS linear regression, vector autoregressive model.
Findings
The findings show that Islamic assets uncertainty is different from conventional uncertainty level. This difference can be due to the Shariah screening and the prohibition of gharar. The main findings suggest that Islamic financial uncertainty is lower than conventional one. The OLS results prove that conventional financial uncertainties have no impact on their Islamic counterparts. In addition, Islamic financial uncertainty appears to have no significant influence on conventional one exception for Dow Jones pair. Overall, the findings support the decoupling hypothesis in term of uncertainty only for SP and MSCI indexes.
Practical implications
Risk averse investors can find their claim in Shariah-compliant assets, as it offers a low level of financial uncertainty. A portfolio manager may benefit from the long run non-association in uncertainty between Islamic and conventional assets especially in time of crisis.
Originality/value
In this work, the authors measured financial uncertainty differently and take into account the specific features of each index type to improve the results quality.
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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…
Abstract
Purpose
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.
Design/methodology/approach
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.
Findings
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.
Originality/value
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.
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In recent times, sustainable investment gaining much attention within the investors’ community and it is broadly driven by environmental, social and governance (ESG) factors. This…
Abstract
Purpose
In recent times, sustainable investment gaining much attention within the investors’ community and it is broadly driven by environmental, social and governance (ESG) factors. This study aims to examine the ESG-based sustainability index and economic policy uncertainty (EPU).
Design/methodology/approach
Corporate sustainability assessment procedure yields Dow Jones sustainability indexes (DJSIUS) and ESG compliant firms become a member of such indexes. To uncover the effects of policy uncertainty as follows: the study considers EPU index, equity market policy uncertainty index, economic and political events for the period 2000–2017. The authors present the study using a conditional volatility framework.
Findings
The correlation between the DJSIUS and policy uncertainty appears to be negative and statistically significant. It is apparent from the results that policy uncertainty does contain important ESG factors that explain the sustainable investment in US firms. Moreover, the stock market boom, credit crunch, Lehman collapse and fiscal crises have shown significant adverse effects on the sustainability index. More importantly, it is seen that investors’ sustainable investing considers presidential election years for portfolio planning; the uncertainty associated with the election years has also shown a negative impact on the sustainable returns.
Practical implications
First, sustainability is essential for the long-term stakeholders’ wealth maximization under governments’ policy uncertainty such as constrained resources, demographic and climate-change-policy, societal expectations, public-policies, regulatory structure. Second, EPU creates new opportunities and risks for sustainable firms and sustainable investing.
Originality/value
The study is novel in which the authors present the effects of uncertainty on socially responsible investing.
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Niaz Ahmed Bhutto, Shabeer Khan, Uzair Abdullah Khan and Anjlee Matlani
The purpose of this study is to investigate the impact of COVID-19 on conventional and Islamic stocks by using the data spanning from February 25, 2020, to February 3, 2021, and…
Abstract
Purpose
The purpose of this study is to investigate the impact of COVID-19 on conventional and Islamic stocks by using the data spanning from February 25, 2020, to February 3, 2021, and employing a panel regression approach.
Design/methodology/approach
In this study a panel regression approach has been used.
Findings
The study finds a negative association between COVID-19 and stock (both Islamic and conventional). After splitting the data into 1st and 2nd waves, the relationship between COVID-19 and stock (both Islamic and conventional) remains the same (negative) in the case of the 1st wave. In contrast, in the case of the 2nd wave, the relationship turned out to be positive. During both waves of the pandemic, the magnitude of the effect is found to be higher for conventional stocks. Additionally, the study also analyzes the aggregate influence of COVID-19 on different sectors and finds that commercial banks, oil and gas exploration and marketing companies are the most influenced sectors. At the same time, automobiles and pharma are the least affected sectors.
Practical implications
The study suggests that markets start gaining momentum to reach their prepandemic level after absorbing the initial shock (emergence of a pandemic). The study also provides thorough insights for market regulators and policymakers by implying the dynamic relations between markets (conventional and Islamic) and financial crisis, which would allow them more effective control of crisis in future endeavors.
Originality/value
This is one of the first studies to investigate the impact of COVID-19 on both conventional and Islamic stocks, especially in the context of Pakistan.
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Zeyneb Hafsa Orhan and Murat Isiker
This paper aims to develop a ranking methodology for the companies included in the Islamic indices in Turkey. Thus, this paper simplifies the decision-making process for investors…
Abstract
Purpose
This paper aims to develop a ranking methodology for the companies included in the Islamic indices in Turkey. Thus, this paper simplifies the decision-making process for investors with Islamic sensitivities to stock market investment when constructing their investment portfolio.
Design/methodology/approach
This paper uses a case study of 20 companies listed on Borsa Istanbul, drawing data from their 2017, 2018 and 2019 financial reports. These companies are scored and ranked according to their compatibility with the screening criteria used by Ziraat Katilim index in Turkey. In addition, this paper uses the quantitative screening process to calculate the ranking scores of these companies.
Findings
The findings show that some companies are highly compatible with the screening criteria, with ranking scores close to 100 points. However, some companies satisfied the criteria on the margin. This may not be a desirable result for some investors.
Research limitations/implications
Only 20 companies are included in the analysis. Since the conventional accounting system is used in Turkey, it was difficult to get exact information about the companies’ Sharīʿah compatibility from the financial results.
Practical implications
The findings assist investors to determine which company is ethically more responsible than others within the Islamic framework. There are also implications for the companies in question, index providers and Sharīʿah scholars.
Social implications
The findings aim to simplify the decision-making process of investors who have Islamic sensitivities to stock exchange market investment when they constitute their portfolio.
Originality/value
To the best of the authors’ knowledge, it is one of the first attempts to develop a ranking methodology for Sharīʿah-screened stocks in Turkey even though Sharīʿah screening has been on the agenda since the late 1990s. This paper also compares 11 indices based on their screening criteria.
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