Cross-sectoral interactions in Islamic equity markets
Kevser Ozturk and
Pacific-Basin Finance Journal, 2015, vol. 32, issue C, 1-20
Although it is essential for investors who want to comply with their religious obligations, cross-sectoral interaction in Islamic equity markets is an untouched subject in finance literature. Accordingly, this paper aims to investigate the interactions between the ten major sectors of Islamic equity markets by implementing the novel methodologies of dynamic conditional correlation (DCC) and dynamic equicorrelation (DECO) on Dow Jones Islamic Market sector indexes. We show that prior to the financialization period, firm fundamentals and real economic factors had an important role in driving the Islamic equity prices, however this role seemed to weaken in the last decade with the global financialization, leading to highly integrated Islamic equity sectors just as in the case of the conventional financial sectors. Moreover, this effect is emphasized further through financial contagion channels in the recent global financial crisis. Our findings thus suggest that Islamic equity indexes are also prone to global shocks hitting the world financial system, and investors should be cautious in interpreting and forecasting the interaction structure between Islamic equity sectors. Furthermore, our results do not support the decoupling hypothesis of the Islamic equity markets from the conventional financial system.
Keywords: Islamic equity markets; Cross-sectoral interaction; Financialization; cDCC; DECO; Penalized contrast function (search for similar items in EconPapers)
JEL-codes: C58 G01 G11 G15 L00 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (18) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:32:y:2015:i:c:p:1-20
Access Statistics for this article
Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee
More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().