Google trends search query and islamic stock indices: an analysis of their lead-lag relationship based on the Malaysian data

Tew, Li Mei and Masih, Mansur (2018): Google trends search query and islamic stock indices: an analysis of their lead-lag relationship based on the Malaysian data.

Abstract

This paper seeks to analyze the lead-lag relationship between Google trends and Islamic Stock Index prices for the case of Malaysia. In recent years, huge data uploaded and shared in the internet everyday has made it a valuable information to understand the behavior of its users and it has been proven worthy by previous literature. The lag-behind of relevant empirical analysis on Islamic stock market is the gap that this paper aims to fill in. We adopt time series analysis to examine the relationships between two Shariah index prices (FTSE BM EMAS Shariah Index and FTSE BM HIJRAH Shariah index) with Google query search volume. In the end, we identify a two-way causality relationship between the Google Trends search query and Islamic stock Index Price and this paper also reveals immediate negative effect on two Shariah Index prices (EMAS, HIJRAH) in response to one standard deviation shock of Google trends search volume about International finance. Therefore, the finding of this paper suggests that Google trends constitute an important trading signal in Shariah stock investment.

• Item Type: MPRA Paper
• Language: English
• Keywords: Islamic stock index prices, Google trends, lead-lag, 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; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy

References

Abd Rahman, Z., (2010). Contracts and the Products of Islamic Banking. CERT Publications, Kuala Lumpur, Malaysia.

Ajmi, A. N., Hammoudeh, S., Nguyen, D. K., & Sarafrazi, S. (2014). 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, 213-227.

Dania, A., & Malhotra, D. K. (2013). An empirical examination of the dynamic linkages of faith-based socially responsible investing. The Journal of Wealth Management, 16(1), 65-79

Ginsberg, J.(2009), Detecting influenza epidemics using search engine query data. Nature, 457, 1012–1014

Goel, S., Hofman, J., Lehaie, S., Pennock, D. M.&Watts, D. J.(2010), Predicting consumer behavior with Web search. Proceedings of the National Academy of Sciences of the United States of America 7, 17486–17490.

Hakim, S., & Rashidian, M. (2002, October). Risk and return of Islamic stock market indexes. In 9th Economic Research Forum Annual Conference in Sharjah, UAE ( 26-28).

Hussin, M. Y. M., Muhammad, F., Abu, M. F., & Awang, S. A. (2012). Macroeconomic variables and Malaysian Islamic stock market: a time series analysis. Journal of Business Studies Quarterly, 3(4), 1-13.

Iqbal, Z., Mirakhor, A., (2007). An Introduction to Islamic Finance: Theory and Practice. John Wiley & Sons, Singapore

Krasicka, M. O., & Nowak, S. (2012). What’s in it for Me? A Primer on Differences between Islamic and Conventional Finance in Malaysia (No. 12-151). International Monetary Fund.

Kristoufek, L. (2013). Can Google Trends search queries contribute to risk diversification?. Scientific reports, 3, article no: 2713.

Kristoufek, L. (2013). BitCoin meets Google Trends and Wikipedia: Quantifying the relationship between phenomena of the Internet era. Scientific reports, 3, article no: 3415.

Majid, M., & Yusof, R. M. (2009). Long-run relationship between Islamic stock returns and macroeconomic variables: An application of the autoregressive distributed lag model. Humanomics, 25(2), 127-141.

Pelat, C., Turbelin, C., Bar-Hen, A., Flahault, A., & Valleron, A. J. (2009). More diseases tracked by using Google Trends. Emerging infectious diseases, 15(8), 1327-1328.

Preis, T., Reith, D. & Stanley, H. E.(2010) Complex dynamics of our economic life on different scales: insights from search engine query data. Philosophical Transactions of the Royal Society A, 368, 5707–5719

Rech, J. (2007). Discovering trends in software engineering with google trend. ACM SIGSOFT Software Engineering Notes, 32(2), 1-2.

Sukmana, R., & Kolid, M. (2012). Impact of global financial crisis on Islamic and conventional stocks in emerging market: an application of ARCH and GARCH method. Asian Academy of Management Journal of Accounting & Finance, 31(2), 357-370.

Usmani, M.T.,(2002). An Introduction to Islamic Finance. Kluwer Law International, The Netherlands.