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Article
Publication date: 21 August 2021

Suriani Suriani, M. Shabri Abd. Majid, Raja Masbar, Nazaruddin A. Wahid and Abdul Ghafar Ismail

The purpose of this study is to empirically analyze the role of sukuk in the monetary policy transmission mechanism through the asset price and exchange rate channels in…

Abstract

Purpose

The purpose of this study is to empirically analyze the role of sukuk in the monetary policy transmission mechanism through the asset price and exchange rate channels in the Indonesian economy.

Design/methodology/approach

Using the monthly data from January 2003 to November 2017, this study uses a multivariate vector error correction model causality framework. To examine the role of sukuk in the monetary policy transmission mechanism through the asset price channel, this study uses the variables of consumption, inflation, interest rates, economic growth and the composite stock price index. Meanwhile, to examine the role of sukuk in the monetary policy transmission mechanism through the exchange rate channel, this study used variables of inflation, interest rates, economic growth, foreign investment and exchange rate.

Findings

This study documented that sukuk has no causal relationship with inflation through asset price and exchange rate channels. Nevertheless, sukuk has a bidirectional causal relationship with economic growth through asset price and exchange rate channels. Sukuk is also documented to have a causal relationship with monetary policy variables of interest rate and stock prices through asset price and exchange rate channels. Finally, a unidirectional causality is recorded running from the exchange rate to sukuk in the exchange rate channel.

Research limitations/implications

The finding of independence of the sukuk market from interest rates provides evidence that the trading of the sukuk in Indonesia has been in harmony with the Islamic tenets.

Practical implications

The relevant Indonesian authorities need to enhance both domestic and global sukuk markets as part of efforts to promote the sustainability of Islamic capital market development in Indonesia.

Originality/value

To the best of the authors’ knowledge, this study is among the first attempts to empirically investigate the role of sukuk in monetary policy transmission through asset price and exchange rate channels in the context of the Indonesian economy.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 7
Type: Research Article
ISSN: 1759-0817

Keywords

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Article
Publication date: 1 October 2018

Said Musnadi, Faisal and M. Shabri Abd. Majid

This purpose of this study is to empirically investigate the investors overreaction and underreaction behaviours across the sectoral stock indices in the Indonesian stock market.

Abstract

Purpose

This purpose of this study is to empirically investigate the investors overreaction and underreaction behaviours across the sectoral stock indices in the Indonesian stock market.

Design/methodology/approach

Nine weekly sectoral stock indices, comprising agriculture; mining; basic industry and chemicals; miscellaneous industry; consumer goods industry; property and real estate; infrastructure, utilities and transportation; finance; and trade, service and investment for the period 2009-2012 were analysed using the paired dependent sample t-test. To provide more insightful empirical evidence, the presence of market anomaly of investor’s overreaction and underreaction was examined on five observations with different vulnerable times.

Findings

The study documented that the overreaction anomaly was present among the winner portfolios in the entire sectoral indices. With the exception of the sectoral index of basic industry and chemicals on the loser portfolio, the study documented the presence of underreaction anomaly among all other sectoral indices in Indonesia. These findings implied that the investors might be able to gain significant profits investing their monies in the sectoral stock market in Indonesia by implementing the contrarian strategy.

Originality/value

Originality in this paper lies in the discussion of overreaction of investors in Indonesia where the stock market has great potential and has different characteristics and different problems from other regions.

Details

International Journal of Ethics and Systems, vol. 34 no. 4
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 28 June 2013

Farhana Ismail, M. Shabri Abd. Majid and Rossazana Ab. Rahim

The main purpose of this paper is to examine cost efficiencies of the selected Islamic and conventional commercial banks over the period of 2006 to 2009 in Malaysia.

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Abstract

Purpose

The main purpose of this paper is to examine cost efficiencies of the selected Islamic and conventional commercial banks over the period of 2006 to 2009 in Malaysia.

Design/methodology/approach

Data envelopment analysis (DEA) was initially used, to investigate the cost efficiency of the Malaysian banking sector and followed by Tobit regression analysis determine factors influencing the efficiency of Islamic and conventional banks in Malaysia.

Findings

The DEA results reveal technical efficiency as the main contributor of cost efficiency for conventional commercial banks and allocative efficiency as the main contributor for cost efficiency of Islamic commercial banks. This indicates conventional commercial banks have been efficient in utilizing information technology and electronics. Islamic commercial banks conversely have been efficient in allocating and utilizing their resources. Additionally, scale efficiency is found to be the main source of technical efficiency for both Islamic and conventional commercial banks, denoting that size is important in improving bank efficiency. The results of Tobit regression analysis are twofold. First, it documents capitalization and bank sizes are positively and significantly associated to efficiency. Secondly, loan quality is found to be negatively and significantly associated to efficiency.

Originality/value

This paper contributes to the body of knowledge through its literature discussions on the efficiency of both Islamic and conventional banks and the effect of banks' specific characteristics on their efficiency.

Details

Journal of Financial Reporting and Accounting, vol. 11 no. 1
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 9 March 2010

Bakri Abdul Karim and M. Shabri Abd. Majid

The purpose of this paper is to re‐examine the stock market integration and short‐run dynamic interactions between the Malaysian stock market and the stock markets of its…

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3475

Abstract

Purpose

The purpose of this paper is to re‐examine the stock market integration and short‐run dynamic interactions between the Malaysian stock market and the stock markets of its major trading partners (the USA, Japan, Singapore, China and Thailand).

Design/methodology/approach

Weekly stock indices spanning from January 1992 to May 2008 is analysed using autoregressive distributed lag (ARDL) bound testing approach and vector autoregression (VAR) framework.

Findings

Stock markets of Malaysia and its major trading partners are found to be integrated. To some extent, it is found that trade does matter for stock market integration. Additional, geographical proximity and close relationship between the countries further contributes towards a greater integration between them. To move forward to a greater financial integration among these countries, trade liberalisation, including reduction or removal of trade and investment barriers would be necessary.

Originality/value

This paper is among the first attempts to use ARDL and VAR frameworks to examine integration among the stock markets of Malaysia and its major trading partners. The findings of the study would shed some empirical lights for the purpose of policy making.

Details

Studies in Economics and Finance, vol. 27 no. 1
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 25 September 2009

M. Shabri Abd Majid and Salina Hj Kassim

The purpose of this paper is to explore empirically the effects of the current financial crisis on the integration and co‐movements of selected stock markets of the…

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4235

Abstract

Purpose

The purpose of this paper is to explore empirically the effects of the current financial crisis on the integration and co‐movements of selected stock markets of the emerging economies, namely Indonesia and Malaysia.

Design/methodology/approach

The paper employs the standard time series technique and vector autoregressive framework.

Findings

The results of this paper support the general view that stock markets tend to show greater degree of integration or increased co‐movements during the crisis period, resulting in lesser benefit of diversification that can be gained by investors participating in these markets.

Research limitations/implications

This paper only focuses on emerging equity markets of Malaysia and Indonesia.

Practical implications

This paper reveals that unlike during the pre‐crisis period, the long‐run diversification benefits that can be earned by investors across the emerging equity markets of Indonesia and Malaysia during the crisis period tend to diminish.

Originality/value

By dividing the study periods into the pre‐crisis period and during the crisis period, it enables us to explore whether the cross‐market linkages between these markets change due to the crisis.

Details

International Journal of Emerging Markets, vol. 4 no. 4
Type: Research Article
ISSN: 1746-8809

Keywords

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Article
Publication date: 21 November 2008

Rosylin Mohd. Yusof and M. Shabri Abd. Majid

In line with the government's policy to promote Malaysia as an international hub for Islamic banking and finance, the purpose of this paper is to evaluate the dynamic…

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5274

Abstract

Purpose

In line with the government's policy to promote Malaysia as an international hub for Islamic banking and finance, the purpose of this paper is to evaluate the dynamic effects of both Islamic and conventional stock markets on foreign portfolio investments.

Design/methodology/approach

First, the paper explores the short and long‐run relationships between (FPI) and three markets, i.e. the goods, money, and securities market. Second, the paper attempts to examine the relative importance of the three markets in accounting for variations in FPI. Consistent with earlier studies, the goods market variable considered is real income (Y). The money market variables tested are the broad money supply (M2), treasury bill rate (TBR) and the US Federal Fund rate (FFR), while the security market is represented by both Kuala Lumpur Shari'ah Index (KLSI) and Kuala Lumpur Composite Index (KLCI).

Findings

The findings of the study indicate that among the three markets studied, the securities market in Malaysia (both conventional and Islamic) is the most significant market in attracting FPI into the economy. This implies that to a certain extent, the government's effort in promoting Malaysia as the international hub for the Islamic capital market has been successful.

Originality/value

The paper suggests that further efforts need to be enhanced in promoting Malaysia as the International hub for the Islamic banking and finance. The paper's findings shed some light on the policy ramifications pertaining to attracting foreign investors into the ICM in Malaysia and in moving towards a more globally competitive capital market.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 1 no. 4
Type: Research Article
ISSN: 1753-8394

Keywords

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Article
Publication date: 22 May 2009

M. Shabri Abd. Majid and Rosylin Mohd. Yusof

The purpose of this paper is to explore the extent to which macroeconomic variables affect the Islamic stock market behavior in Malaysia in the post 1997 financial crisis period.

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3766

Abstract

Purpose

The purpose of this paper is to explore the extent to which macroeconomic variables affect the Islamic stock market behavior in Malaysia in the post 1997 financial crisis period.

Design/methodology/approach

The paper employs the latest estimation technique of autoregressive distributed lag (ARDL) model approach to cointegration.

Findings

The results suggest that real effective exchange rate, money supply M3, treasury bill rate (TBR) and federal fund rate (FFR) seem to be suitable targets for the government to focus on, in order to stabilize the Islamic stock market and to encourage more capital flows into the market. As for the interest rates and stock returns relationship, the paper finds that when interest rates rise either domestically (TBR) or internationally (FFR), the Muslim investors will buy more Shari'ah compliant stocks; thereby escalating the Islamic stock prices.

Research limitations/implications

The results of this study are limited to the post 1997 financial crisis period until the beginning of the year 2006 for a small open economy, Malaysia.

Practical implications

The paper reveals that both changes in the local monetary policy variables and in the US monetary policy as measured by the changes in the FFR have a significant direct impact on the Islamic stock market behavior in Malaysia.

Originality/value

The paper adopts the latest time series econometrics technique to test for cointegration, ARDL. And it is among the earliest attempts to investigate the long‐run effects of the macroeconomic variables changes either domestically or internationally on the Islamic stock market.

Details

Humanomics, vol. 25 no. 2
Type: Research Article
ISSN: 0828-8666

Keywords

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Article
Publication date: 18 September 2017

Nicholas Addai Boamah

The purpose of this paper is to examine the degree of integration of emerging markets with the world market and amongst them. Further, the impact of the 2008 global…

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5571

Abstract

Purpose

The purpose of this paper is to examine the degree of integration of emerging markets with the world market and amongst them. Further, the impact of the 2008 global financial crisis (GFC) on and structural breaks in the degree of integration are explored. The paper, additionally, analyses the behaviour of the level and the rate of change of the degree of integration around the period of the GFC.

Design/methodology/approach

The paper relies on the R2 from a single factor world and the incremental R2 from a two-factor world and emerging market models as proxies for the global and emerging markets degree of integration, respectively. Relying on the Quandt test for unknown structural breakdates, the paper examines structural breaks in the degree of integration.

Findings

The degree of global integration of emerging markets exceeds their degree of integration with themselves, particularly in the recent period. Additionally, the GFC is a significant driver of the recent increase in world market integration. We observe significant structural shifts in both the degree of the world and emerging markets integration measures. The breaks in the world market integration largely coincide with the GFC, whereas that of the emerging market integration is dispersed. Also, the level of the world market degree of integration has reversed recently, although, the degree of world market integration remains above pre-crisis point.

Practical implications

There exist high country-specific components in emerging market returns that are not accounted for by the world and emerging market factors despite the recent increase in global integration. Thusly, portfolios that diversify across emerging markets appear to have a high diversification potential. Additionally, substantial diversification gains may be realised with the inclusion of emerging market assets in global portfolios.

Originality/value

The paper shows that the emerging markets respond similarly to common global, although, diversely to emerging markets events. Additionally, evidence of the impacts of the GFC on the degree of global integration of emerging markets is presented.

Details

International Journal of Emerging Markets, vol. 12 no. 4
Type: Research Article
ISSN: 1746-8809

Keywords

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Article
Publication date: 14 September 2015

M. Shabri Abd. Majid and Salina H. Kassim

– This purpose of this paper is to empirically examine the contribution of the Islamic banking and financial institutions (IBFIs) to economic growth in Malaysia.

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2938

Abstract

Purpose

This purpose of this paper is to empirically examine the contribution of the Islamic banking and financial institutions (IBFIs) to economic growth in Malaysia.

Design/methodology/approach

Focusing on the post-1997 economic turmoil, the paper relies on several time series tests, such as autoregressive distributed lag (ARDL), vector error correction model (VECM) and variance decompositions (VDCs).

Findings

The paper documents significant role played by the IBFIs in Malaysian economy. In particular, significant unidirectional causality was found from the IBFIs development to economic growth, supporting the finance-growth led hypothesis or the supply-leading view.

Research limitations/implications

The paper only focuses its analysis on the role of the IBFIs in the Malaysian economy and not the financial sector as a whole. Thus, the findings of this paper are indicative, but inconclusive for the entire financial sector in the country.

Practical implications

Continuous efforts should be undertaken to promote the development of the Islamic banking industry due to its significant contribution to Malaysia’s economic growth by further improving the Islamic financial infrastructure, increasing the pool of human capital in the Islamic banking industry, providing conducive legal environment to the IBFIs and maintaining the Islamic financial sector stability.

Originality/value

This paper is the first attempt to empirically assess the contribution of Islamic banking institutions in Malaysia using ARDL, VECM and VDCs.

Details

Journal of Islamic Accounting and Business Research, vol. 6 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

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Article
Publication date: 15 January 2018

Buerhan Saiti and Nazrul Hazizi Noordin

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…

Abstract

Purpose

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).

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

International Journal of Emerging Markets, vol. 13 no. 1
Type: Research Article
ISSN: 1746-8809

Keywords

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