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This paper aims to study the co-movement dynamics of Islamic equity returns to explain international portfolio diversification opportunities for investors having a heterogeneous stock holding period in light of Brexit.

The authors use the following three recent methodologies: the multivariate generalised autoregressive conditional heteroskedastic-dynamic conditional correlations, continuous wavelet transforms and maximum overlap discrete wavelet transform. Dow Jones Islamic country-based indexes are used from 2 September 2013 to 31 December 2019.

There is a high correlation between the United Kingdom (UK) Islamic stock market return with the Canadian, USA, Malaysian and Indian implying lesser diversification benefits for the investors. However, the results tend to indicate that UK Islamic stock market investors who have allocated their investment in Sri Lanka, Kuwait, Japan and Turkey have enjoyed diversification benefits. Besides, there is a declining correlation between UK Islamic stock markets and other selected markets aftermath of Brexit. Turkey seems the most volatile stock over the period, appealing to risk-lover investors to gain from price changes. When the shock occurs in the financial sector, the volatility is mean-reverting faster than other markets in Sri Lanka. On the other hand, Malaysia appears to have the least volatility implying a stable financial sector.

The results tend to shed light on effective portfolio diversification benefits in light of the recent shock (Brexit) between the UK Islamic stock index and other selected indexes that vary from country to country depending on investment horizons. This critically confirms the significance of heterogeneity in investment horizons and provides significant inferences for portfolio diversification strategies.

To the best of the authors’ knowledge, this study is the first study investigating the Brexit effect on Islamic stocks, guiding Shariah sensitive investors in their diversification strategies, providing information to investors to consider the implications of this incident on Islamic stocks for future shocks.

The purpose of this chapter is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions’ Islamic markets; namely USA, Europe, and BRIC. This study makes the initial attempt to fill in the gaps of previous studies by focusing on the proxies of global Islamic markets to identify the correlations among those selected markets by employing the recent econometric methodologies such as multivariate generalized autoregressive conditional heteroscedastic–dynamic conditional correlations (MGARCH–DCC), maximum overlap discrete wavelet transform (MODWT), and the continuous wavelet transform (CWT). By utilizing the MGARCH-DCC, this chapter tries to identify the strength of the time-varying correlation among the markets. However, to see the time-scale-dependent nature of these mentioned correlations, the authors utilized CWT. For robustness, the authors have applied MODWT methodology as well. The findings tend to indicate that the Asian investors have better portfolio diversification opportunities with the US markets, followed by the European markets. BRIC markets do not offer any portfolio diversification benefits, which may be explained partly by the fact that the Asian markets cover partially the same countries of BRIC markets, namely India and China. Considering the time horizon dimension, the results narrow down the portfolio diversification opportunities only to the short-term investment horizons. The very short-run investors (up to eight days only) can benefit through portfolio diversification, especially in the US and European markets. The above-mentioned results have policy implications for the Asian Islamic investors (e.g., Portfolio Management and Strategic Investment Management).

The aim of this study is to measure portfolio diversification benefits of the Turkey-based equity investors into top trading partner countries. Portfolio diversification benefits are analyzed from the viewpoint of two types of investors in Turkey: conventional equities investors and Islamic equity investors.

In order to evaluate the time-varying correlations of the trading partner country's stock index returns with the Turkish stock index returns, the multivariate-generalized autoregressive conditional heteroskedasticity–dynamic conditional correlation (GARCH-DCC) is applied based on daily data covering 13 years' period between January 22, 2008 and January 22, 2021.

The results revealed that the US stock indices provide the most diversified benefit for both conventional and Islamic Turkey-based equity investors. In general, Islamic indices exhibit relatively lower correlation with trading partners than conventional indices. Turkey and Russia are recorded as the most volatile indices.

The diversification potential in trading partners for Turkey-based Islamic equity investors has not been studied yet. This study is to fill in this gap in the literature and to give fruitful insights to both conventional and Islamic investors.

This paper aims to investigate the immediate effect of the outbreak of the COVID-19 pandemic by investigating volatility transmission and dynamic correlation between stock (conventional and Islamic) markets, bitcoin and major commodities such as gold, oil and silver at different investment horizons before and after 161 trading days of the outbreak of the COVID-19 pandemic.

The MGARCH-DCC and maximum overlap discrete wavelet transform -based cross-correlation were used in the estimation of the volatility spillover and continuous wavelet transform in the estimation of the time-varying volatility and correlation between the assets at different investment horizons.

The authors observed a sudden correlation breakdown following the COVID-19 shock. Oil (Bitcoin) was a major volatility transmitter before (during) COVID-19. Digital gold (Bitcoin), gold and silver became highly correlated during COVID-19. The highest co-movement between the assets was observed at medium and long-term investment horizons.

The study findings have a financial implication for day traders, investors and policymakers in the understanding of volatility transmission and intercorrelation in a bid to actively manage stylized and well-diversified asset portfolios.

This study is unique for its employment in estimating the time-varying conditional volatility of the investable assets and cross-correlations between them at different investment horizons, particularly before and after COVID-19 outbreak.

This paper aims to analyse the opportunity of an exclusive investment in the DJ Islamic indexes. The objective is to characterize the links between MENA region index with seven DJ Islamic indexes.

A co-movement analysis was conducted to assess whether there is a safe investment during crisis. The VECM verifies the existence of a long run association. The MGARCH-DCC characterizes the dynamic links. The wavelet coherence detects a correlation in a time-frequency domain, which is relevant to set up a diversification strategy based on investment horizons.

Despite the existence of a long run association between the Islamic indexes, diversification opportunities are present. The MGARCH-DCC results recommend including the USA, Canada and Emerging Markets indexes with the Mena index to get diversification benefits. The Wavelet coherence confirms these results for 0 to 16 days holding period and more than six-months’ investment horizons. Hence, MENA portfolio managers should not invest in Europe, UK and Emerging Markets indexes.

This study focused only on the bivariate correlation analysis without taking into consideration multivariate relationships. Future research should use multiple wavelet coherence and explore S&P Shariah indexes.

This work is important for investors searching for assets governed by sharia rules, who reject resorting to conventional markets, and policy makers dealing with coordination costs. They would be able to formulate strategies based on the different indexes’ relationships.

This paper enriches the limited stream of literature focusing only on Islamic indexes. Due to the important development of Islamic Finance in each MENA country, the authors shed the light on this Region’s index.

The purpose of this paper is to investigate the extent to which Chinese equity investors can benefit from diversifying their portfolio into Shariah-compliant (Islamic) indices. It examines three Islamic stock indices (FTSE Shariah China price index, MSCI China Islamic IMI price index and the DJ Islamic Greater China price index) and ten sectoral indices in Shanghai Stock Exchange as a sample.

The multivariate GARCH dynamic conditional correlations (MGARCH-DCC) is deployed to estimate the time-varying linkages of returns of the selected indices, covering approximately eight years daily data starting from 28 August 2009 to 29 September 2017.

In general, in terms of volatility, the results indicate that all Islamic Indices are less volatile than the conventional indices. From the correlation analysis, the results imply that Chinese conventional equity investors would benefit from Islamic stock indices, especially when they include DJ Islamic Greater China in their portfolio.

The findings of this paper may have several significant implications for the Chinese equity investors and fund managers for better understanding about co-movements of the Chinese conventional sectoral indices with the Shariah-compliant stock indices with the purpose of gaining higher risk-adjusted returns through portfolio diversification.

On the backdrop of growing importance of Shariah compliant equity markets, the purpose of this paper is to study cross-country portfolio diversification benefits for investors with major trading partners of Saudi Arabia, namely, USA, China, Japan, Germany and India, who have already invested or tend to invest in Saudi Arabian stock market.

The authors have investigated time invariant, dynamic correlations at different investments horizons of the investors among Islamic asset classes by applying relevant econometric techniques like multivariate generalized autoregressive conditional heteroscedastic –DCC and continuous wavelet transforms. For robustness, this study also applied maximal overlap discrete wavelet transform.

The findings tend to indicate that the Saudi Arabian investors have portfolio diversification benefits with all major trading partners in the short-term investment horizon. Interestingly, Saudi Arabian market has the least portfolio diversification benefits with the Chinese market. However, in the long run, all markets are correlated, yielding minimum portfolio diversification benefits and most importantly Saudi Arabian investors have portfolio diversification benefits with the Indian Islamic equity market in almost all investment horizons. The findings are highly consistent across different econometric technique estimations.

The authors are only considering five major trading partners of Saudi Arabia. Also, the authors are using S&P and FTSE shari’ah index. Moreover, the time period of the study is constrained by the availability of shari’ah indices. Econometric limitations are also well documented in the literature.

The results could be beneficial for the investors, portfolio managers, hedge fund managers and institutional investors and also could be useful for the policy makers in their policy-making decisions.

Only very few studies have looked into the benefits of international portfolio diversification from the perspective of local investors as well as the portfolio diversification benefits with the major trading partners of Saudi Arabia. One of the novelties of the method is to make the stock investors, practitioners and policy makers aware of the portfolio diversification benefits available at different time scales such as 4, 8, 16, 32, 64 and 256 trading days as investment holding periods to unveil the true dynamics of co-movement between those different assets.

Even though Bitcoin has been often labelled as a safe haven asset class in the literature, the influence of economic policy uncertainty (EPU) on the diversifying opportunities offered by Bitcoin in relation to other assets needs to be investigated. This paper aims to investigate how the EPU affects diversification of commodity, conventional, Islamic and sustainable equity returns in relation to its impact on Bitcoin returns.

The authors use advanced time-series econometrics, namely, multivariate generalized autoregressive conditional heteroscedastic-dynamic conditional correlation and continuous wavelet transformation, for the analysis of the daily returns for the aforementioned assets between 01 August 2011 and 01 September 2019.

First, the authors found a strong evidence of Bitcoin’s mean reverting trend in the long run while its volatility has decreased significantly since 2013. After separating the EPU into two regimes (high and low), diversification opportunities with Bitcoin seems to disappear in a high EPU period, while the hedging opportunity tends to prevail in a low EPU period for all classes of assets. Importantly, the findings indicate that Bitcoin offers short-term diversification for sustainable and Islamic equity as well as energy stocks during a low uncertainty period. Consequently, in relation to the policy uncertainty, Bitcoin provides similar hedging opportunities than commodities like Gold and Silver. Overall, the study shows that EPU is remarkably important in explaining the average portfolio returns of Bitcoin, suggesting that this indicator can be perceived as a decent explanatory factor for portfolio diversification.

The study significantly extends the empirical literature of Bitcoin’s portfolio diversification by taking EPU into consideration. To the best of authors’ knowledge, this is one of the few studies to investigate the asymmetric effects of US EPU on Bitcoin’s hedging capabilities by taking into account major conventional equity, sustainable equity, Islamic equity, gold, silver and oil.

The purpose of this paper is to examine the extent to which the Indonesian Shariah compliant investors can benefit from the portfolio diversification with the Islamic indices of its trading partners and selected commodities such as gold, crude oil, and cocoa.

The authors use daily time series data covering both Islamic and commodity indices starting from June 4, 2007 until December 30, 2016 by the application of multivariate-generalized autoregressive conditional heteroscedastic and continuous wavelet analysis.

The findings tend to indicate that investors with exposure in Shariah compliant indices of Indonesia and wanting to gain more diversification benefits should invest either in the USA or India Islamic equity. Instead, the greater benefits will be obtained by Shariah compliant investors if they invest in the USA Islamic indices during long-term investment horizons. If investors want to invest in medium investment horizons, investing in India Islamic equity is a viable option. The findings further suggest that gold has a role of diversification benefits as a “safe haven” instrument for investors. It is advisable for the investors that have exposure in commodities (gold, crude oil, and cocoa) and want to invest in Indonesian Islamic equity, they should hold the portfolio for not more than 16 days to gain diversification benefits.

The results of this study are expected to have crucial implications for the Indonesia Shariah compliant investors and portfolio managers because it will help them to understand portfolio diversification benefits with different stock holding periods or investment horizons.

The volatility of bitcoin (BTC) and time horizon is the center point for investment decisions. However, attention is not often drawn to the relationship between BTC and equity indices. Thus, the purpose of this paper is to investigate the volatility and time frequency domain of BTC with stock markets.