Munich Personal RePEc Archive

Time-varying correlation between islamic stock indices: evidence from the GCC countries based on MGARCH-DCC approach

Yousef, Mona and Masih, Mansur (2017): Time-varying correlation between islamic stock indices: evidence from the GCC countries based on MGARCH-DCC approach.

[img]
Preview
PDF
MPRA_paper_100986.pdf

Download (459kB) | Preview

Abstract

The paper makes an attempt to investigate the portfolio diversification opportunities available within the Islamic stock indices in the GCC countries. That requires the estimation of the time-varying variances of and covariances between the daily returns of the GCC Islamic stock indices. Hence the method used is the recent multivariate GARCH-DCC which takes care of their time-varying relationships. The findings tend to indicate that the unconditional volatility of the GCC stock returns are very low which may indicate that the reruns are stable and the risk is very low. However, the VaR estimator shows that the risk was rising dramatically since 2011, probably due to the political instability during this period. The time-varying conditional correlation between the stock returns of these countries appears to be low in general which provides an advantage to the investors interested in investing in the GCC financial markets. That means it provides more stable returns with low correlation between the stock returns and thus less risky. The results also indicate lower level of integration between the GCC stock markets.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.