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Identifying the asymmetric price dynamics of Islamic equities: Implications for international investors

Mevlüt Camgöz and Mehmet Hanefi Topal

Research in International Business and Finance, 2022, vol. 60, issue C

Abstract: This study investigates the long-run asymmetric price dynamics of Islamic equity indexes and their conventional peers during the 2002–2018 period with respect to global equity prices (represented by a broad global equity index). We applied hidden cointegration and asymmetric causality tests to the indexes for 20 developed and 17 developing countries. Our findings have revealed neither the positive nor negative components of Islamic and conventional indexes to be cointegrated with the broad global equity index apart from a few cases. Rather than hidden cointegration results, we have found significant asymmetric causality effects, particularly in developing countries. Our findings suggest that neither the Islamic or conventional indexes share any common stochastic trend with the broad global equity index in bear and bull markets, which implies different degrees of downward and upward rigidities in the aggregate series. The conclusion section of the research illustrates the implications for international investors.

Keywords: Islamic equity markets; Hidden cointegration; Asymmetric causality; International investments (search for similar items in EconPapers)
JEL-codes: C32 F21 G15 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:60:y:2022:i:c:s0275531922000022

DOI: 10.1016/j.ribaf.2022.101614

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