Testing for multifractality of Islamic stock markets
Foued Saâdaoui ()
Physica A: Statistical Mechanics and its Applications, 2018, vol. 496, issue C, 263-273
Studying the power-law scaling of financial time series is a promising area of econophysics, which has often contributed to the understanding of the intricate features of the global markets. In this article, we examine the multifractality of some financial processes and the underlying formation mechanisms in the context of Islamic equity markets. The well-known Multifractal Detrended Fluctuation Analysis (MF-DFA) is used to investigate the self-similar properties of two Dow Jones Islamic Market Indexes (DJIM). The results prove that both indexes exhibit multifractal properties. By discussing the sources of multifractality, we find that they are related to the occurrence of extreme events, long-range dependency of autocorrelations and fat-tailed distribution of returns. These results have several important implications for analysts and decision makers in modeling the dynamics of Islamic markets, thus recommending efficient asset allocation plans to investors dealing with Islamic equity markets.
Keywords: MF-DFA; Multifractal returns; Power law autocorrelation; Extreme values; Islamic financial markets (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:496:y:2018:i:c:p:263-273
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