The Impact of Global Financial Shocks to Islamic Indices: Speculative Influence or Fundamental Changes?

Authors

  • Shaista Arshad IIUM Institute of Islamic Banking and Finance International Islamic University Malaysia
  • Syed Aun Raza Rizvi INCEIF

DOI:

https://doi.org/10.31436/jif.v2i1.6

Abstract

The ripples of the financial crisis are still being felt over different parts of the world causing much distress to the real economy. The capital market, in particular, took a massive hit during the crisis plummeting to all-time lows. In the footsteps of globalization, a financial shock to the US capital market can cause a spill over effect to other markets, Islamic capital market included. Hence, this paper attempts to address the question whether Islamic indices are affected through fundamental changes or short-term influences by sudden changes in volatility as compared to their conventional counterparts. To empirically analyze this, we apply continuous wavelet technique to identify co-movements between world financial indices and Islamic indices for World, Asia Pacific and Emerging Markets specifically. Covering a time period of 15 years (1997 – 2011), our results confer that Islamic indices in the Asia Pacific and Emerging Market region are partially immune to speculative shocks to global financial services making them a good alternative. Similarly, Islamic indices testified more stable due to their rigid screening criteria.

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How to Cite

Arshad, S., & Rizvi, S. A. R. (2013). The Impact of Global Financial Shocks to Islamic Indices: Speculative Influence or Fundamental Changes?. Journal of Islamic Finance, 2(1). https://doi.org/10.31436/jif.v2i1.6

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Articles