Publication:
Diversification in Islamic and conventional equity investments : evidence from Malaysia

Date

2017

Journal Title

Journal ISSN

Volume Title

Publisher

Kuala Lumpur : International Islamic University Malaysia, 2017

Subject LCSH

Stocks -- Malaysia
Investments -- Malaysia
Stocks (Islamic law)
Investments (Islamic law)

Subject ICSI

Call Number

t BPH 568 N39 2017

Research Projects

Organizational Units

Journal Issue

Abstract

The main purpose of this study is to quantify the extent to which the Malaysia-based equity investors can benefit from diversifying their portfolio into the Southeast Asian market and the world’s largest equity markets regionally (Southeast Asia, China, Japan, Hong Kong and India) and also internationally (UK, US, Canada, France, Germany and Switzerland). This study identifies the portfolio diversification benefits from two perspectives; the Malaysia-based conventional equity investor and also the Malaysia-based Islamic equity investors. The multivariate GARCH-dynamic conditional correlation is deployed to estimate the time-varying linkages of returns of the selected Asian and international stock indices with the Malaysian stock index returns, covering approximately 8 years daily data starting from 29 June 2007 to 30 June 2016. At the regional level, the results indicate that both conventional and Islamic Malaysia-based equity investors would benefit most if they include the Japanese stock indices in their portfolio. Meanwhile, at the international level, the results imply that the US stock indices provide the most diversification benefits for both conventional and Islamic Malaysia-based equity investors. Our empirical findings may have several policy implications. The evidence on market shocks and the extent of the interdependence of the Malaysian market with cross-border markets provided in the present study may give some useful insights in formulating effective macroeconomic stabilization policies in the efforts of preventing contagion effect from deteriorating the domestic economy.

Description

Keywords

Citation

Collections