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The Co-movement of Selective Conventional and Islamic Stock Markets in East Asia: Is there any Impact on Shariah Compliant Equity Investment in China?

Buerhan Saiti and Abul Masih
Authors registered in the RePEc Author Service: Burhan Saiti

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the dynamic causal linkages in the daily returns among seven major conventional and Islamic stock indices in East Asia through the application of the time series techniques. We analyse seven conventional and Shariah -compliant stock indices (such as, FTSE Shariah China Index, Asia Shariah index, Malaysia EMAS Shariah Index, China SSE Composite Index, Hang Seng Index, Nikkei 225 and KOSPI) covering the period from 26 October 2007 to 1 March 2011. Essentially, the purpose of this research is to identify the extent of influence of conventional and Islamic, regional and international equity markets on Shariah-compliant equity investment in China. Our study is focused on investigating the following empirical questions: (i) which indices do the Shariah China Index commove with? (ii) which indices is the Shariah China Index Granger-causally related with ? and (iii) which major stock market was driving the selective conventional and Islamic markets? Our findings tend to suggest: (i) the Sharia China Index appears to have a theoretical and long-run comovement with all the select conventional and Islamic markets (as evidenced in the Cointegration and LRSM tests) (ii) the Shariah China Index is Granger-caused by all the conventional and Islamic markets (as evidenced in the VECM tests) (iii) Finally, what stands out is the leadership of the China conventional SSE market followed by the Malaysia Shariah market in driving all indices including the Sharia China index (as evidenced in the VDCs tests).

Keywords: Shariah-Compliant Stocks; Unit Root Test; Cointegration; LRSM; VECM; VDCs; IRFs; Persistent Profiles (search for similar items in EconPapers)
JEL-codes: C58 G15 (search for similar items in EconPapers)
Date: 2014-06-29
New Economics Papers: this item is included in nep-fmk and nep-sea
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