Size and Volatility: new evidence from an application of wavelet approach to the emerging Islamic mutual funds’ industry

Alaabed, Alaa and Masih, Mansur (2014): Size and Volatility: new evidence from an application of wavelet approach to the emerging Islamic mutual funds’ industry.

Abstract

As far as the author’s knowledge, the paper is the first attempt dedicated to understanding the risk and volatility of constituents of the young and rapidly growing Islamic mutual funds’ industry. The novelty of our approach lies in the usage of wavelet tools to high-frequency financial market data, which allows us to understand the relationship between returns of funds of different sizes in a completely different way. Major part of economic time series analysis is done in time or frequency domain separately. Wavelet analysis can combine these two fundamental approaches, so we can work in time-frequency domain. Using wavelet coherence, we have gained valuable insights into the volatility and continuous dynamics of cross-correlations between small, medium and large size Islamic mutual funds.

• Item Type: MPRA Paper
• Language: English
• Keywords: Islamic Mutual Funds, Volatility, Size, Assets Under Management, Wavelet Analysis, Wavelet Coherence, 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 > G2 - Financial Institutions and Services

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