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Are Islamic Equity Markets “Safe Havens”? Testing the Contagion Effect using DCC-GARCH

Yunus Kilic () and Mehmet Buğan ()

International Journal of Academic Research in Accounting, Finance and Management Sciences, 2016, vol. 6, issue 4, 167-176

Abstract: It is argued in the literature especially after the 2008 global crisis that the Islamic markets are more resistant than conventional markets against shocks in global markets. Therefore, in this study financial contagion effect is analyzed for both markets through dynamic conditional correlations (DCC) between international Islamic indices and conventional regional indices. In this context, the relations between regional markets of USA, EU, the Gulf and Asia-Pacific for the period of 2004-2016 are analyzed by DCCMV-EGARCH method. The findings show that there is a high correlation between Islamic and conventional index returns. The study concludes that the Islamic markets do not react differently from conventional markets against financial shocks and they are not “safe havens” for investors during financial crisis.

Keywords: Islamic financial markets; contagion effect; dynamic conditional correlation (search for similar items in EconPapers)
Date: 2016
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