Exploring Efficiency, Co-integration, Causality and Volatility Clustering in Unrestricted and Islamic Portfolios

Salman Ahmed Shaikh (), Muhammad Hakimi Mohd. Shafiai, Abdul Ghafar Ismail and Mohd. Adib Ismail
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Muhammad Hakimi Mohd. Shafiai: Universiti Kebangsaan Malaysia
Abdul Ghafar Ismail: Universiti Kebangsaan Malaysia
Mohd. Adib Ismail: Universiti Kebangsaan Malaysia
Authors registered in the RePEc Author Service: Abd Ghafar Ismail Ismail

Chapter Chapter 6 in Islamic Capital Markets, 2016, pp 101-122 from Palgrave Macmillan

Abstract: Abstract Unlike unrestricted portfolios, Islamic portfolios have a narrow opportunity set for investment. They also face trading restrictions due to the prohibition of futures, short selling, options and day trading which can potentially create significant limits to arbitrage. In this study, we explore weak-form market efficiency in comparable unrestricted and Islamic portfolios. The study also investigates the existence of Autoregressive Conditional Heteroscedasticity (ARCH) effects in the returns series of unrestricted and Islamic portfolios in developed and emerging markets. Finally, we also investigate the existence of bi-directional causality between portfolios. From the runs test, we find that the returns of most indices are random, except for a few. Finally, we also find strong evidence for co-integration and causality in both directions between Islamic and unrestricted market portfolios.

Keywords: Market efficiency; Weak-form efficiency; Capital markets; Volatility; Islamic portfolios (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pcichp:978-3-319-33991-7_6

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DOI: 10.1007/978-3-319-33991-7_6

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