A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries

Recently there has been a heightened global concern over ‘contagion’ in the conventional financial markets. Our study is motivated by the desire to test empirically whether this contagion is reflected in the fast growing Islamic financial markets as well. This study is the first attempt at testing...

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Main Authors:	Saiti, Buerhan, Dewandaru, Ginangar, Masih, Mansur
Format:	Article
Language:	English
Published:	INSI Publications 2013
Subjects:	HG4501 Stocks, investment, speculation
Online Access:	http://irep.iium.edu.my/44503/ http://irep.iium.edu.my/44503/ http://irep.iium.edu.my/44503/1/contagion.pdf

id	iium-44503
recordtype	eprints
spelling	iium-445032018-05-24T06:57:45Z http://irep.iium.edu.my/44503/ A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries Saiti, Buerhan Dewandaru, Ginangar Masih, Mansur HG4501 Stocks, investment, speculation Recently there has been a heightened global concern over ‘contagion’ in the conventional financial markets. Our study is motivated by the desire to test empirically whether this contagion is reflected in the fast growing Islamic financial markets as well. This study is the first attempt at testing whether there has been any contagion among the Shari’ah-compliant stock markets during the most recent international financial crisis: the US subprime crisis of 2008, with the application of a technique known as ‘wavelet approach’ which has been very recently imported to finance from engineering science. We analyse the daily data covering the period from June 2006 to August 2009 for the stock market indices of the original ASEAN countries plus Australia and USA such as, NYSE COMPOSITE (US), MSCI Islamic (Australia), MSCI Islamic (Singapore), FTSE Bursa EMAS Shari’ah (Malaysia), Jakarta SE Islamic (Indonesia), MSCI Islamic (Thailand) and MSCI Islamic (Philippines). Our findings based on the time-scale decomposition property of wavelet analysis tend to indicate that in all cases of selective Shari’ah-compliant stock markets the changes in the wavelet correlation coefficients are insignificant at all time scales during the US subprime crisis. The changes observed in wavelet correlation coefficients are insignificant due to overlapping of confidence intervals implying that there is no clear evidence of contagion at all time scales. These findings are plausible and intuitive and have implications for the Shari’ah-compliant stock markets in terms of asset allocation strategy of risk managers and for policymakers’ optimal policy response to a crisis. INSI Publications 2013 Article PeerReviewed application/pdf en http://irep.iium.edu.my/44503/1/contagion.pdf Saiti, Buerhan and Dewandaru, Ginangar and Masih, Mansur (2013) A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries. Australian Journal of Basic and Applied Sciences, 7 (7). pp. 268-280. ISSN 1991-8178 http://www.ajbasweb.com/
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG4501 Stocks, investment, speculation
spellingShingle	HG4501 Stocks, investment, speculation Saiti, Buerhan Dewandaru, Ginangar Masih, Mansur A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries
description	Recently there has been a heightened global concern over ‘contagion’ in the conventional financial markets. Our study is motivated by the desire to test empirically whether this contagion is reflected in the fast growing Islamic financial markets as well. This study is the first attempt at testing whether there has been any contagion among the Shari’ah-compliant stock markets during the most recent international financial crisis: the US subprime crisis of 2008, with the application of a technique known as ‘wavelet approach’ which has been very recently imported to finance from engineering science. We analyse the daily data covering the period from June 2006 to August 2009 for the stock market indices of the original ASEAN countries plus Australia and USA such as, NYSE COMPOSITE (US), MSCI Islamic (Australia), MSCI Islamic (Singapore), FTSE Bursa EMAS Shari’ah (Malaysia), Jakarta SE Islamic (Indonesia), MSCI Islamic (Thailand) and MSCI Islamic (Philippines). Our findings based on the time-scale decomposition property of wavelet analysis tend to indicate that in all cases of selective Shari’ah-compliant stock markets the changes in the wavelet correlation coefficients are insignificant at all time scales during the US subprime crisis. The changes observed in wavelet correlation coefficients are insignificant due to overlapping of confidence intervals implying that there is no clear evidence of contagion at all time scales. These findings are plausible and intuitive and have implications for the Shari’ah-compliant stock markets in terms of asset allocation strategy of risk managers and for policymakers’ optimal policy response to a crisis.
format	Article
author	Saiti, Buerhan Dewandaru, Ginangar Masih, Mansur
author_facet	Saiti, Buerhan Dewandaru, Ginangar Masih, Mansur
author_sort	Saiti, Buerhan
title	A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries
title_short	A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries
title_full	A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries
title_fullStr	A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries
title_full_unstemmed	A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries
title_sort	wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the asean countries
publisher	INSI Publications
publishDate	2013
url	http://irep.iium.edu.my/44503/ http://irep.iium.edu.my/44503/ http://irep.iium.edu.my/44503/1/contagion.pdf
first_indexed	2023-09-18T21:03:16Z
last_indexed	2023-09-18T21:03:16Z
_version_	1777410765750272000

A wavelet-based approach to testing shari’ah-compliant stock market contagion:evidence from the ASEAN countries

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