Economics at your fingertips  

Hidden cointegration reveals hidden values in Islamic investments

Christos Alexakis, Vasileios Pappas and Alexandros Tsikouras

Journal of International Financial Markets, Institutions and Money, 2017, vol. 46, issue C, 70-83

Abstract: We explore long-run relationships between Islamic and conventional equity indices for the period 2000–2014. We adopt a hidden co-integration technique to decompose the series into positive and negative components; thus allowing the investigation of the indices during upward and downward markets. We find evidence of bi-directional dynamics during upward, downward and some mixed market movements. However, after adding control variables to our models, only the relationship for the negative components retains its significance; indicating that the Islamic index is the least responsive during bad times. This highlights the robust nature of Islamic investments and a possible differentiated investor reaction to financial information during market downtrends. Implications for practitioners are highlighted in a case study.

Keywords: Islamic equity index; Hidden co-integration; Portfolio optimisation; Dow Jones (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2017-10-13
Handle: RePEc:eee:intfin:v:46:y:2017:i:c:p:70-83