Are Islamic stock markets immune from contagion during the financial crisis?

Zhang, Hengchao and Mohamad, Azhar and Hamid, Zarinah (2021) Are Islamic stock markets immune from contagion during the financial crisis? Journal of Economic Cooperation and Development. ISSN 1308-7800 (In Press)

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Abstract

We assess the contagion effect of the global financial crisis (GFC) and the European debt crisis (EDC) on Islamic and conventional stock market indices of the US, GCC and Malaysia. We run the asymmetric dynamic conditional correlation GARCH specification on daily closing prices of relevant indices from 1 January 2006 through 31 December 2016. Our results show that the Malaysia Islamic stock market is exempted from the contagion effect of GFC and EDC when the shock stems from the US Islamic stock market. Investors in the US Islamic equity markets can create a safety net by reallocating some of their portfolios into Malaysia Islamic stock market, which appears to be more resilient. However, we do find a significant contagion influence between the US Islamic and GCC Islamic stock market, suggesting that the GCC Islamic stock market cannot provide an effective hedge for the US investors seeking a Shariah-compliant investment. Contagion effect generally is inconsistent and not significant for conventional stock markets of these three countries.

Item Type:	Article (Journal)
Additional Information:	10344/94051
Uncontrolled Keywords:	Contagion; Financial crisis; Asymmetric dynamic conditional correlation (A-DCC); Islamic indices
Subjects:	H Social Sciences > HB Economic Theory > HB3711 Business cycles. Economic fluctuations H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance H Social Sciences > HG Finance > HG4001 Financial management. Business finance. Corporation finance.
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences Kulliyyah of Economics and Management Sciences > Department of Economics Kulliyyah of Economics and Management Sciences > Department of Finance
Depositing User:	Dr. HENGCHAO ZHANG
Date Deposited:	22 Dec 2021 15:41
Last Modified:	22 Dec 2021 15:41
URI:	http://irep.iium.edu.my/id/eprint/94051

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