Should the Malaysian islamic stock market investors invest in regional and international equity markets to gain portfolio diversification benefits?
Fatin Umairah and
MPRA Paper from University Library of Munich, Germany
The paper asks the following questions: (i) What is the extent of the dynamic linkage of the conventional and Islamic stocks with the Malaysian Islamic stock market? (ii) Should the Malaysian Islamic stock market investors invest in (regional and international) conventional or Islamic equity market to gain international portfolio diversification benefits? (iii) How would the portfolio diversification benefits of the Malaysian Islamic investors change given different investor stock holding periods (e.g. 2-4 days, 4-8 days, 8-16 days, etc.)? The appropriate methods employed to addressing these questions are MGARCH-DCC and Continuous Wavelet Transformation (CWT). The data period covered is 2007 – 2017. The results tend to indicate that the FTSE Bursa Malaysia Hijrah Shariah Index has low correlation with the global stock market index, regardless of conventional or Islamic. However, the correlations in between the Islamic stock markets are quite high. Malaysian Islamic stock market investors who have allocated their investment in the global markets may enjoy portfolio diversification benefits. However, Malaysian Islamic stock market investors may not enjoy the real benefit if they allocate their funds in Dow Jones Islamic Asia Pacific Market but interestingly the medium-term investors may benefit from their investment. Also, the Malaysian Islamic stock market investors may lose if they invest in the conventional Malaysia Stocks Market (EMAS) as they may consist of the same stocks. Overall, the results tend to indicate that the Malaysian Islamic stock investors can reap the benefits of portfolio diversification in the regional and international equity markets if they take care of the extent of correlations between stocks at different investment horizons.
Keywords: Stock market; Dynamic linkage; MGARCH; Wavelet Coherence; Malaysia; FTSE Hijrah Shariah Stock Index (search for similar items in EconPapers)
JEL-codes: C22 C58 G11 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/82117/1/MPRA_paper_82117.pdf original version (application/pdf)
Working Paper: Should the Malaysian Islamic stock market investors invest in regional and international equity market to gain portfolio diversification benefits ? (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:82117
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().