Portfolio diversification between exchange rates and islamic stocks: evidence from the USA, Euro area, Japan and Malaysia

Kabir, Mustafa and Masih, Mansur (2019): Portfolio diversification between exchange rates and islamic stocks: evidence from the USA, Euro area, Japan and Malaysia.

Abstract

This paper uses the daily data from four counties to estimate the portfolio diversification opportunities between Islamic stock prices and exchange rates. Although there are many works on stocks and exchange rates in the field of conventional finance, there is relatively few work in the field of Islamic finance. This study makes an attempt to fill in this gap by applying recent and appropriate methodologies such as, MGARCH-DCC, MODWT and CWT. The results tend to indicate that the portfolio diversification opportunities between Islamic stocks and exchange rates are not conclusive but vary depending on the stock- holding periods in the short and long run. Hence the Islamic stock holders should take into account the investment horizons of their stocks while diversifying their stocks across with exchange rates.

• Item Type: MPRA Paper
• Language: English
• Keywords: Islamic stocks, exchange rates, portfolio diversification, MGARCH-DCC, MODWT, CWT, Malaysia
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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