LOW-FREQUENCY VOLATILITY AND MACROECONOMIC DYNAMICS: CONVENTIONAL VERSUS ISLAMIC STOCK MARKETS

Hong-Bae Kim () and A.S.M. Sohel Azad
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Hong-Bae Kim: Department of Business Administration, Dongseo University, Pusan, South Korea
A.S.M. Sohel Azad: ��Department of Finance, Faculty of Business and Law, Deakin University, 221 Burwood Highway, Burwood, Vic-3125, Australia

The Singapore Economic Review (SER), 2022, vol. 67, issue 01, 411-438

Abstract: This study investigates the relationship between macroeconomic risk and low-frequency volatility of conventional and Islamic stock markets from around the world. Using a panel of 36 countries, representing developed, emerging and Islamic countries for the period from 2000 to 2016, the study finds that low-frequency market volatility is lower for Islamic countries and, markets with more number of listed companies, higher market capitalization relative to GDP and larger variability in industrial production. The study also finds that low-frequency component of volatility is greater when the macroeconomic factors of GDP, unemployment, short-term interest rates, inflation, money supply and foreign exchange rates are more volatile. The empirical results are robust to various alternative specifications and split sample analyses. The findings imply that religiosity has an influence on the correction of market volatility and investors may consider the Islamic stocks to diversify their risks.

Keywords: Low-frequency volatility; macroeconomic risk; conventional stock markets; Islamic stock markets (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1142/S0217590819420049

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