Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis

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...

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Main Authors:	Saiti, Buerhan, Noordin, Nazrul Hazizi
Format:	Article
Language:	English English English
Published:	Emerald Group Publishing Ltd. 2018
Subjects:	HG4501 Stocks, investment, speculation
Online Access:	http://irep.iium.edu.my/57070/ http://irep.iium.edu.my/57070/ http://irep.iium.edu.my/57070/1/57070_Does%20Islamic%20equity%20investment%20provide.pdf http://irep.iium.edu.my/57070/2/57070_Does%20Islamic%20equity%20investment%20provide_SCOPUS.pdf http://irep.iium.edu.my/57070/13/57070%20Does%20Islamic%20equity%20investment%20provide%20diversification%20benefits%20to%20conventional%20investors_wos.pdf

id	iium-57070
recordtype	eprints
spelling	iium-570702019-01-24T03:08:27Z http://irep.iium.edu.my/57070/ Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis Saiti, Buerhan Noordin, Nazrul Hazizi HG4501 Stocks, investment, speculation 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. © 2018, Emerald Publishing Limited. Emerald Group Publishing Ltd. 2018 Article PeerReviewed application/pdf en http://irep.iium.edu.my/57070/1/57070_Does%20Islamic%20equity%20investment%20provide.pdf application/pdf en http://irep.iium.edu.my/57070/2/57070_Does%20Islamic%20equity%20investment%20provide_SCOPUS.pdf application/pdf en http://irep.iium.edu.my/57070/13/57070%20Does%20Islamic%20equity%20investment%20provide%20diversification%20benefits%20to%20conventional%20investors_wos.pdf Saiti, Buerhan and Noordin, Nazrul Hazizi (2018) Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis. International Journal of Emerging Markets, 13 (1). pp. 267-289. ISSN 1746-8809 https://www.emeraldinsight.com/doi/pdfplus/10.1108/IJoEM-03-2017-0081
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English English
topic	HG4501 Stocks, investment, speculation
spellingShingle	HG4501 Stocks, investment, speculation Saiti, Buerhan Noordin, Nazrul Hazizi Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis
description	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. © 2018, Emerald Publishing Limited.
format	Article
author	Saiti, Buerhan Noordin, Nazrul Hazizi
author_facet	Saiti, Buerhan Noordin, Nazrul Hazizi
author_sort	Saiti, Buerhan
title	Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis
title_short	Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis
title_full	Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis
title_fullStr	Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis
title_full_unstemmed	Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis
title_sort	does islamic equity investment provide diversification benefits to conventional investors? evidence from the multivariate garch analysis
publisher	Emerald Group Publishing Ltd.
publishDate	2018
url	http://irep.iium.edu.my/57070/ http://irep.iium.edu.my/57070/ http://irep.iium.edu.my/57070/1/57070_Does%20Islamic%20equity%20investment%20provide.pdf http://irep.iium.edu.my/57070/2/57070_Does%20Islamic%20equity%20investment%20provide_SCOPUS.pdf http://irep.iium.edu.my/57070/13/57070%20Does%20Islamic%20equity%20investment%20provide%20diversification%20benefits%20to%20conventional%20investors_wos.pdf
first_indexed	2023-09-18T21:20:37Z
last_indexed	2023-09-18T21:20:37Z
_version_	1777411856653090816

Does Islamic equity investment provide diversification benefits to conventional investors? Evidence from the multivariate GARCH analysis

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