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Geopolitical Risks and Movements in Islamic Bond and Equity Markets: A Note

Elie Bouri (), Riza Demirer (), Rangan Gupta () and Hardik Marfatia

No 201743, Working Papers from University of Pretoria, Department of Economics

Abstract: This study applies a non-parametric causality-in-quantiles test to examine the causal effect of geopolitical risks on return and volatility dynamics of Islamic equity and bond markets. Geopolitical risks are generally found to impact Islamic equity market volatility measures, rather than returns. However, Geopolitical risks tend to predict both returns and volatility measures of Islamic bonds. Interestingly, causality, when it exists for returns and/or volatility of Islamic equities and bonds, is found to hold over entire conditional distributions of returns and volatilities, barring the extreme ends of the same.

Keywords: Geopolitical Risks; Islamic Stock and Bond Markets; Returns and Volatility; Quantile Causality (search for similar items in EconPapers)
JEL-codes: C22 G15 (search for similar items in EconPapers)
Date: 2017-06
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