Islamic spot and index futures markets: Where is the price discovery?
Paresh Kumar Narayan,
Dinh Phan () and
Joakim Westerlund ()
Pacific-Basin Finance Journal, 2018, vol. 52, issue C, 123-133
This paper examines the source of price discovery for Islamic stocks. We pair a large number of Islamic stocks to country-specific index futures and estimate price discovery using a vector error correction model. The results obtained using data for 19 countries suggest that for most countries (63% of the sample) price discovery is dominated by the spot market. We show that for these countries, a mean-variance investor makes annualized average profit of 4.91% compared to an average buy-and-hold profit of 2.97% per annum.
Keywords: Price discovery; Asset pricing; Islamic stocks; Predictive regression; Investors (search for similar items in EconPapers)
JEL-codes: G11 G12 G17 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:52:y:2018:i:c:p:123-133
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