Are there profit (returns) in Shariah-compliant exchange traded funds? The multiscale propensity

Faizal Farouk and Abul Masih

Research in International Business and Finance, 2016, vol. 38, issue C, 360-375

Abstract: This paper is the first attempt to investigate the multiscale tendency of the co-movement and cross-correlation of nine Islamic Exchange Traded Fund (ETF) returns across the global developed and emerging markets using both wavelet coherence and wavelet MODWT methods. The wavelet coherence results tend to indicate consistent co-movement between most of the ETF returns especially in the long run. The study also uncovers evidence of wide variation of co-movement across the time-scales during the global financial crisis and the Euro debt crisis. Strong co-movement can be observed during the global financial crisis, both for the medium term investors and long term investors. The paper studies the relationship between different ETF returns using wavelet multi-resolution analysis. The cross-correlation analysis also shows certain significant and positive correlations between the ETF returns, especially during the period of global financial crisis. The findings from these two recent dynamic time-scale decomposition methodologies have important policy implications for both risk management and investors’ investment policy.

Keywords: Islamic exchange traded fund returns; Wavelet coherence; MODWT (search for similar items in EconPapers)
JEL-codes: C22 C58 E44 G15 (search for similar items in EconPapers)
Date: 2016
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Working Paper: Are There Profit (Returns) in Shariah-Compliant Exchange Traded Funds? The Multiscale Propensity (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:38:y:2016:i:c:p:360-375

DOI: 10.1016/j.ribaf.2016.04.007

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