The Impact of Brexit on Islamic Stock Markets Employing MGARCH-DCC and Wavelet Correlation Analysis

Cikiryel, Burak and Masih, Mansur (2017): The Impact of Brexit on Islamic Stock Markets Employing MGARCH-DCC and Wavelet Correlation Analysis.

Abstract

Recent literature attract the attention to the issue of whether heterogeneity in stock holding periods has an impact on resulting investor exposures. In this research, we aim to study co-movement dynamics of Islamic equity returns to explain international portfolio diversification opportunities for investors having heterogeneous stock holding periods in the context of Brexit. We employ three recent appropriate methodologies: MGARCH-DCC, Continuous Wavelet Transforms (CWT), and Maximum Overlap Discrete Wavelet Transform (MODWT). The unique contribution of this research is that it is the first study investigating the Brexit effect on Islamic stocks. It would guide Shari’ah investors in their diversification strategies. The results tend to shed light on the effective portfolio diversification benefits in light of shock (Brexit) between UK Islamic stock index and other selected indices varying from country to country depending on investment horizons. This critically confirms the significance of heterogeneity in investment horizons and provides significant implications for portfolio diversification strategies.

• Item Type: MPRA Paper
• Language: English
• Keywords: Brexit, Islamic stock markets, MGARCH-DCC, CWT, MODWT
• Subjects: 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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