Resilience of Islamic Equities against Uncertainty
DOI:
https://doi.org/10.21834/e-bpj.v9iSI19.5765Keywords:
World Uncertainty Index, Economic Uncertainty Index, Resilience, Islamic EquitiesAbstract
This research aims to analyze the resilience of Islamic Equities against the economy and non-economic uncertainty within the past decades. Islamic Equities are represented by the developed, emerging, and frontier market S&P BMI Shariah Index. The World Uncertainty Index and economic policy uncertainty measure uncertainty. This paper uses a time-series approach utilizing the Vector Autoregressive (VAR) model to estimate the resilience of Islamic equities based on quarterly stock return, the World Uncertainty Index, and the Economic Uncertainty Index from 2013 to 2023. It shows that Islamic equities are resilient to economic uncertainty but not non-economic uncertainty.
References
Abduh, M. (2020). Volatility of Malaysian conventional and Islamic indices: does financial crisis matter? Journal of Islamic Accounting and Business Research, 11(1), 1–11. https://doi.org/10.1108/JIABR-07-2017-0103 DOI: https://doi.org/10.1108/JIABR-07-2017-0103
Abdullahi, S. I. (2021). Islamic equities and COVID-19 pandemic: measuring Islamic stock indices correlation and volatility in period of crisis. Islamic Economic Studies, 29(1), 50–66. https://doi.org/10.1108/IES-09-2020-0037/FULL/XML DOI: https://doi.org/10.1108/IES-09-2020-0037
Abusharbeh, M. (2020). Determinants of Islamic bank financing in the Middle East: Vector Error Correction Model (VECM). Investment Management and Financial Innovations, 17(4), 285–298. https://doi.org/10.21511/imfi.17(4).2020.25 DOI: https://doi.org/10.21511/imfi.17(4).2020.25
Ahir, H., Bloom, N., & Furceri, D. (2018). The World Uncertainty Index. In SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3275033 DOI: https://doi.org/10.2139/ssrn.3275033
Ahir, H., Bloom, N., & Furceri, D. (2022). The World Uncertainty Index (NBER WORKING PAPER SERIES, Vol. 29763). http://www.nber.org/papers/w29763 DOI: https://doi.org/10.3386/w29763
Al-Thaqeb, S. A., Algharabali, B. G., & Alabdulghafour, K. T. (2020). The pandemic and economic policy uncertainty. International Journal of Finance and Economics. https://doi.org/10.1002/IJFE.2298 DOI: https://doi.org/10.1002/ijfe.2298
Ashraf, D., Rizwan, M. S., & Ahmad, G. (2022). Islamic equity investments and the COVID-19 pandemic. Pacific Basin Finance Journal, 73. https://doi.org/10.1016/j.pacfin.2022.101765 DOI: https://doi.org/10.1016/j.pacfin.2022.101765
Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. Quarterly Journal of Economics, 131(4), 1593–1636. https://doi.org/10.1093/qje/qjw024 DOI: https://doi.org/10.1093/qje/qjw024
Bloom, N. (2014). Fluctuations in uncertainty. Journal of Economic Perspectives, 28(2), 153–176. https://doi.org/10.1257/JEP.28.2.153 DOI: https://doi.org/10.1257/jep.28.2.153
Delle Foglie, A., & Panetta, I. C. (2020). Islamic stock market versus conventional: Are islamic investing a ‘Safe Haven’ for investors? A systematic literature review. Pacific Basin Finance Journal, 64. https://doi.org/10.1016/j.pacfin.2020.101435 DOI: https://doi.org/10.1016/j.pacfin.2020.101435
Fernandez-Perez, A., Gilbert, A., Indriawan, I., & Nguyen, N. H. (2021). COVID-19 pandemic and stock market response: A culture effect. Journal of Behavioral and Experimental Finance, 29, 100454. https://doi.org/https://doi.org/10.1016/j.jbef.2020.100454 DOI: https://doi.org/10.1016/j.jbef.2020.100454
Ftiti, Z., & Hadhri, S. (2019). Can economic policy uncertainty, oil prices, and investor sentiment predict Islamic stock returns? A multi-scale perspective. Pacific-Basin Finance Journal, 53, 40–55. https://doi.org/https://doi.org/10.1016/j.pacfin.2018.09.005 DOI: https://doi.org/10.1016/j.pacfin.2018.09.005
Godil, D. I., Sarwat, S., Sharif, A., & Jermsittiparsert, K. (2020a). How oil prices, gold prices, uncertainty and risk impact Islamic and conventional stocks? Empirical evidence from QARDL technique. Resources Policy, 66(April), 101638. https://doi.org/10.1016/j.resourpol.2020.101638
Godil, D. I., Sarwat, S., Sharif, A., & Jermsittiparsert, K. (2020b). How oil prices, gold prices, uncertainty and risk impact Islamic and conventional stocks? Empirical evidence from QARDL technique. Resources Policy, 66(January), 101638. https://doi.org/10.1016/j.resourpol.2020.101638
Godil, D. I., Sarwat, S., Sharif, A., & Jermsittiparsert, K. (2020c). How oil prices, gold prices, uncertainty and risk impact Islamic and conventional stocks? Empirical evidence from QARDL technique. Resources Policy, 66(April). https://doi.org/10.1016/j.resourpol.2020.101638 DOI: https://doi.org/10.1016/j.resourpol.2020.101638
Gujarati, D. N. (2004). Basic Econometrics (Fourth Edi). The McGraw-Hill Companies. https://doi.org/10.1596/1813-9450-8096 DOI: https://doi.org/10.1596/1813-9450-8096
Hammoudeh, S., Kim, W. J., & Sarafrazi, S. (2015). Sources of Fluctuations in Islamic, U.S., EU, and Asia Equity Markets: The Roles of Economic Uncertainty, Interest Rates, and Stock Indexes. Emerging Markets Finance and Trade, 52(5), 1195–1209. https://doi.org/10.1080/1540496X.2014.998561 DOI: https://doi.org/10.1080/1540496X.2014.998561
Hammoudeh, S., Mensi, W., Reboredo, J. C., & Nguyen, D. K. (2014). Dynamic dependence of the global Islamic equity index with global conventional equity market indices and risk factors. Pacific Basin Finance Journal, 30, 189–206. https://doi.org/10.1016/j.pacfin.2014.10.001 DOI: https://doi.org/10.1016/j.pacfin.2014.10.001
Hasan, M. B., Mahi, M., Hassan, M. K., & Bhuiyan, A. B. (2021). Impact of COVID-19 pandemic on stock markets: Conventional vs. Islamic indices using wavelet-based multi-timescales analysis. The North American Journal of Economics and Finance, 58, 101504. https://doi.org/https://doi.org/10.1016/j.najef.2021.101504 DOI: https://doi.org/10.1016/j.najef.2021.101504
Herdayanti, D., & Hariyanto, E. (2022). Pengaruh Sertifikat Bank Indonesia, Inflasi, Nilai Tukar, serta Pendapatan dan Belanja Pemerintah terhadap Permintaan Imbal Hasil Sukuk Retail. Jurnal Anggaran Dan Keuangan Negara Indonesia, 4(2), 199–212. DOI: https://doi.org/10.33827/akurasi2022.vol4.iss2.art159
Lin, B., & Su, T. (2020a). The linkages between oil market uncertainty and Islamic stock markets: Evidence from quantile-on-quantile approach. Energy Economics, 88, 104759. https://doi.org/https://doi.org/10.1016/j.eneco.2020.104759
Lin, B., & Su, T. (2020b). The linkages between oil market uncertainty and Islamic stock markets: Evidence from quantile-on-quantile approach. Energy Economics, 88, 104759. https://doi.org/10.1016/j.eneco.2020.104759 DOI: https://doi.org/10.1016/j.eneco.2020.104759
Lu, X., & White, H. (2014). Robustness checks and robustness tests in applied economics. Journal of Econometrics, 178(PART 1), 194–206. https://doi.org/10.1016/j.jeconom.2013.08.016 DOI: https://doi.org/10.1016/j.jeconom.2013.08.016
Lütkepohl, H. (2004). Vector autoregressive and vector error correction models. In Applied Time Series Econometrics. https://doi.org/10.1017/CBO9780511606885.004 DOI: https://doi.org/10.1017/CBO9780511606885.004
Lütkepohl, H. (2010). Variance Decomposition. In S. N. Durlauf & L. E. Blume (Eds.), Macroeconometrics and Time Series Analysis (pp. 369–371). Palgrave Macmillan UK. https://doi.org/10.1057/9780230280830_38 DOI: https://doi.org/10.1057/9780230280830_38
Lütkepohl, H., & Krätzig, M. (2004). Applied time series econometrics. Cambridge university press. DOI: https://doi.org/10.1017/CBO9780511606885
Lütkepohl, H., Saikkonen, P., & Trenkler, C. (2001). Maximum eigenvalue versus trace tests for the cointegrating rank of a VAR process. The Econometrics Journal, 4(2), 287–310. https://doi.org/10.1111/1368-423x.00068 DOI: https://doi.org/10.1111/1368-423X.00068
Mauro, F. di, Caristi, P., Couderc, S., Maria, A. Di, Ho, L., Grewal, B. K., Masciantonio, S., Ongena, S., & Zaher, S. (2013). Islamic Finance in Europe. In Occassional Paper Series (146; Occasional Paper Series). https://doi.org/10.4337/9781781002513 DOI: https://doi.org/10.4337/9781781002513
Mirza, N., Abbas Rizvi, S. K., Saba, I., Naqvi, B., & Yarovaya, L. (2022). The resilience of Islamic equity funds during COVID-19: Evidence from risk adjusted
performance, investment styles and volatility timing. International Review of Economics and Finance, 77(July 2021), 276–295. https://doi.org/10.1016/j.iref.2021.09.019 DOI: https://doi.org/10.1016/j.iref.2021.09.019
Mustafa, D. A., Abdulsalam, H. A., & Yusuf, J. B. (2016). Islamic Economics and the Relevance of Al-Qawā‘id Al-Fiqhiyyah. SAGE Open, 6(4). https://doi.org/10.1177/2158244016671374 DOI: https://doi.org/10.1177/2158244016671374
Neusser, K. (2016). Time-series econometrics. In Springer Texts in Business and Economics. Springer. https://doi.org/10.4337/9781849803182.00108 DOI: https://doi.org/10.1007/978-3-319-32862-1
Pratama, Y. C. (2015). Macroeconomic Variable and its Influence on Performance of Indonesian Islamic Banking. Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah, VII(1), 59–72. https://doi.org/10.15408/aiq.v7i1.1359 DOI: https://doi.org/10.15408/aiq.v7i1.1359
Saeed Meo, M., Jameel, K., Chowdhury, M. A. F., & Ali, S. (2021). Islamic financial markets response to uncertainty: an application of quantile-on-quantile approach. Journal of Economic and Administrative Sciences. https://doi.org/10.1108/jeas-03-2021-0052 DOI: https://doi.org/10.1108/JEAS-03-2021-0052
Salisu, A. A., & Shaik, M. (2022). Islamic Stock indices and COVID-19 pandemic. International Review of Economics & Finance, 80, 282–293. https://doi.org/10.1016/J.IREF.2022.02.073 DOI: https://doi.org/10.1016/j.iref.2022.02.073
Tahir, S. H., Tahir, F., Syed, N., Ahmad, G., & Ullah, M. R. (2020). Stock market response to terrorist attacks: An event study approach. Journal of Asian Finance, Economics and Business, 7(9), 31–37. https://doi.org/10.13106/JAFEB.2020.VOL7.NO9.031 DOI: https://doi.org/10.13106/jafeb.2020.vol7.no9.031
Wooldridge, J. M. (2015). Introductory econometrics: A modern approach. Cengage learning.
Zivot, E., & Wang, J. (2003). Vector Autoregressive Models for Multivariate Time Series. In Modeling Financial Time Series with S-Plus® (pp. 369–413). https://doi.org/10.1007/978-0-387-21763-5_11 DOI: https://doi.org/10.1007/978-0-387-21763-5_11
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Clarashinta Canggih, Fira Nurafini, Erfaniah Putri Wakhidah
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.