Which Commodity Group is the Safe Haven for Islamic Stock Markets?

Authors

  • Gülfen Tuna Sakarya University, Turkey
  • Vedat Ender Tuna CPA, Adapazan/Sakarya, Turkey

DOI:

https://doi.org/10.31436/ijema.v27i2.683

Keywords:

Commodity markets, Safe haven, Hedging, Islamic stock markets

Abstract

This study analyzes which commodity group has hedging or safe haven characteristics for the Islamic Stock Markets. The spot prices of the S&P GSCI; Industrial Metals, Energy, Precious Metals, Agriculture, and Softs indices were used for the commodity groups analyzed in the study. The research was conducted with 2477 daily data set between March 31st, 2008 and March 29th, 2018 using the Baur and McDermott (2010) model. According to the findings, all commodity groups are safe havens for Islamic Stock Markets. Only the precious metals, however, have both safe haven and risk aversion characteristics. According to these obtained results, both theoreticians and practitioners may develop new investment strategies. In addition, they may offer new investment funds that can be pooled by including the commodities analyzed within the study in different weights. 

References

Ajmi, A.N., S. Hammoudeh, D.K. Nguyen, and S. Sarafrazi. “How Strong are the Causal Relationships between Islamic Stock Markets and Conventional Financial Systems? Evidence from Linear and Nonlinear Tests.†Journal of International Financial Markets, Institutions and Money 28, no. 1 (2014): 213-27.

Al-Khazali, O., H.H. Leanand, and A. Samet. “Do Islamic Stock Indexes Outperform Conventional Stock Indexes? A Stochastic Dominance Approach.†Pacific Basin Finance Journal 28, (2014): 29-46.

Arouri, M.E.H., A. Lahiani, and D.K. Nguyen. “World Gold Prices and Stock Returns in China: Insights for HedgingaAnd Diversification Strategies.†Economic Modelling 44, (2015): 273-82.

Ashraf, D., and N. Mohammad. “Matching Perception with the Reality-Performance of Islamic Equity Investments.†Pacific-Basin Finance Journal 28, (2014): 175-89.

Azar, S.A., and N.A. Chopurian. “Commodity Indexes and the Stock Markets of the GCC Countries.†Arab Economic and Business Journal 13, no. 2 (2018): 134-42.

Baur, D.G. and B.M. Lucey. “Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold.†The Financial Review 45, (2010): 217-29.

________, and T.K. Mcdermott. “Is Gold a Safe Haven? International Evidence.†Journal of Banking and Finance 34, (2010):1886-98.

Büyükşahin, Bahattin and Michel Robe. Does Paper Oil Matter? Energy Markets’ Financialization and Equity-Commodity Co-Movements, Working paper, CFTC, 2011.

________, M.S. Haigh, and M.A. Robe. “Commodities and Equities: Ever a “Market of One�†The Journal of Alternative Investments 12, no. 3 (2009): 76-95.

Chen, A.S., and J.W. Lin. “The Relation between Gold and Stocks: An Analysis of Severe Bear Markets.†Applied Economics Letters 21, no. 3 (2014): 158-70.

Choudhry, T., S.S. Hassan, and S. Shabı. “Relationship between Gold and Stock Markets During the Global Financial Crisis: Evidence From Nonlinear Causality Tests.†International Review of Financial Analysis 41, (2015): 247-56.

Ciner, C., C. Gurdgıev, and B. M. Lucey. “Hedges and Safe Havens: An Examination of Stocks, Bonds, Gold, Oil and Exchange Rates.†International Review of Financial Analysis 29, (2013): 202-11.

Derigs, U., and S. Marzban. “Review and Analysis of Current Shariah-Compliant Equity Screening Practices.†International Journal of Islamic and Middle Eastern Finance and Management 1, no. 4 (2008): 285-303.

Ghazali, M., H.H. Lean, and Z. Baharı. “Is Gold a Hedge or a Safe Haven? An Empirical Evidence of Gold and Stocks in Malaysia.†International Journal of Business and Society 14, no. 3 (2013):428-43.

Hammoudeh, S., W. Mensi, J. C. Reboredo, and D. K. Nguyen. “Dynamic Dependence of the Global Islamic Equity Index With Global Conventional Equity Market Indices and Risk Factors.†Pacific-Basin Finance Journal 30, (2014): 189-206.

Hoangh, T.H.V. “Gold Quoted at Paris and the Diversification of French Portfolios from 2004 to 2009.†Paper presented at AFFI Conference, Montpellier, 11-13 May 2011.

Hussin, M.Y.M., and J.T. Borhan. “Analisis Perkembangan Pasaran Saham Islam di Malaysia.†Jurnal Syariah 17, no. 3 (2009): 431-56.

________, F. Muhammad, A.A. Razak, G.P. Tha, and N. Marwan. “The Link between Gold Price, Oil Price and Islamic Stock Market: Experience from Malaysia.†Journal of Studies in Social Sciences 4, no. 2 (2013):161-82.

Ibrahim, M. H. “Financial Market Risk and Gold Investment in an Emerging Market: The Case of Malaysia.†International Journal of Islamic and Middle Eastern Finance and Management 5, no. 1 (2012): 25-34.

Johnson, R., and L. Soenen. “Commodity Prices and Stock Market Behavior in South American Countries in the Short Run.†Emerging Markets Finance and Trade 45, no. 4 (2009): 69-82.

Kang, X. “Commodity Investments: The Missing Piece of the Portfolio Puzzle?†20 September 2012. https://ssrn.com/abstract=2153319.

Khan, A.R., S.H. Kabir, O.K.R. Bashar, and A.M.M. Masih. “Time Varying Correlation between Islamic Equity and Commodity Returns: Implications for Portfolio Diversification.†The Journal of Develeoping Areas 49, no. 5 (2015):115-28.

Mensi, W., M. Beljid, A. Boubaker, and S. Managi. (2013). “Correlations and Volatility Spillovers Across Commodity and Stock Markets: Linking Energies, Food, and Gold.†Economic Modelling 32, (2013): 15-22.

_______, S. Hammoudeh, and S. H. Kang. “Precious Metals, Cereal, Oil and Stock Market Linkages and Portfolio Risk Management: Evidence from Saudi Arabia.†Economic Modelling 51, (2015): 340–58.

_______, S. Hammoudeh, A. Sensoy, and S. M. Yoon. “Analysing Dynamic Linkages and Hedging Strategies between Islamic and Conventional Sector Equity Indexes.†Applied Economics 49, no. 25 (2017): 2456-79.

Nagayev, R., M. Disli, K. Inghelbrecht, and A. Ng. “On the Dynamic Links between Commodities and Islamic Equity.†Energy Economics 58 (2016): 125-40.

Öztek, M.F., and N. Öcal. “Financial Crises and the Nature of Correlation between Commodity and Stock Markets.†International Review of Economics & Finance 48 (2017): 56-68.

Reboredo, J., C, and M.A. Rivera-Castro. “Can Gold Hedge and Preserve Value When the US Dollar Depreciates?.†Economic Modelling 39 (2014): 168–73.

Rizvi, S.A.R., S. Arshad, and N. Alam. “Crises and Contagion in Asia Pacific -Islamic v/s Conventional Markets.†Pacific-Basin Finance Journal 34 (2015): 315-26.

Rossi, B. “The Changing Relationship between Commodity Prices and Equity Prices in Commodity Exporting Countries.†IMF Economic Review 60, no. 4 (2012): 533-69.

Silvennoinen, A., and S. Thorp. “Financialization, Crisis and Commodity Correlation Dynamics.†Journal of International Financial Markets, Institutions and Money 24, (2013): 42-65.

Tuna, G. “Interaction between Precious Metals Price and Islamic Stock Markets.†International Journal of Islamic and Middle Eastern Finance and Management 12, no. 1 (2019): 96-114.

Wai, P.S., M.T. Ismail, and S. S. Kun. “Gold Price Effect on Stock Market: A Markov Switching Vector Error Correction Approach.†Proceedings of the 3rd International Conference on Mathematical Sciences. (2014): 990-93.

Zapata, H.O., J.D. Detre, and T. Hanabuchi. Historical Performance of Commodity and Stock Markets.†Journal of Agricultural and Applied Economics 44, no. 3 (2012): 339-57.

Ziaei, S.M. “Effects of Gold Price on Equity, Bond and Domestic Credit: Evidence from Asean +3.†Procedia – Social and Behavioral Sciences 40, (2012): 341-46.

Downloads

Published

2019-12-31

How to Cite

Tuna, G., & Tuna, V. E. (2019). Which Commodity Group is the Safe Haven for Islamic Stock Markets?. International Journal of Economics, Management and Accounting, 27(2), 253–267. https://doi.org/10.31436/ijema.v27i2.683

Issue

Section

Articles