Effects of Political Turmoil (Arab Spring) on Portfolio Diversification Benefits: Perspectives of the Moroccan Islamic Stock investors

Rahim, Adam Mohamed and Masih, Mansur (2014): Effects of Political Turmoil (Arab Spring) on Portfolio Diversification Benefits: Perspectives of the Moroccan Islamic Stock investors.

Abstract

This study makes the initial attempt to investigate the time varying volatility and return linkages of Moroccan Islamic stock indices with the market and regional based indices especially during times of political unrest. More specifically, we use the Dow Jones Islamic Developed markets and Emerging markets indices to represent the market based indices, whereas Dow Jones Islamic Europe and Dow Jones Islamic Asia Pacific were used to represent regional based indices. In an attempt to unravel the time-varying nature of these co-movements, the MGARCH-DCC which is one of the recent research methodologies was adopted and applied on daily data covering from June 2007 to December 2012. From the discovered results, it is seen that the Moroccan Islamic investors may derive benefits from portfolio diversification across stock markets of Developed markets and the Asia Pacific market especially during times when there is no political unrest. The findings obtained under this study are crucial for understanding the role of political uncertainty on the stability of the stock market and is of great interest to investors especially the Islamic ones.

• Item Type: MPRA Paper
• Language: English
• Keywords: Islamic stock indices, Arab Springs, Multivariate GARCH-DCC, Opportunities for portfolio diversification
• 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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