Should the Malaysian Islamic stock market investors invest in regional and international equity market to gain portfolio diversification benefits ?

Umirah, Fatin and Masih, Mansur (2017): Should the Malaysian Islamic stock market investors invest in regional and international equity market to gain portfolio diversification benefits ?

Abstract

This paper is aimed at determining the dynamic links of conventional and Islamic, regional and international equity markets with Shariah compliant equity (FTSE Hijrah Shariah Index) investing in Malaysia using MGARCH-DCC and Wavelet Coherence, given different holding periods. The data for this study is taken for the year 2007-2017. Overall, the results show there is a dynamic link between six sample stocks and this indicates that the Malaysian Shariah Compliant investors can invest in international or regional markets with different investment horizons bearing important implications for portfolio diversification strategies. In particular, the results tend to show that the FTSE Bursa Malaysia Hijrah Shariah Index has the low correlation with global stock market indexes, regardless of conventional or Islamic. However, the correlation between Islamic stocks are quite high. These results have implications for the portfolio diversification by the Malaysian Shariah investors.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stock market, Dynamic link, MGARCH, Wavelet Coherence, Malaysia, FTSE Hijrah Shariah Stock Index
• Subjects: 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; 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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