Stock Markets in Islamic Countries: An Inquiry into Volatility, Efficiency and Integration

136 Pages·2017·9.438 MB·English

by  Shaista Arshad (auth.)

Palgrave CIBFR Studies in Islamic Finance
Series Editors
Nafis Alam
University of Nottingham Malaysia Campus
Selangor, Malaysia
Syed Aun R. Rizvi
Lahore University of Management Sciences
Islamabad, Pakistan
TheCentreforIslamicBusinessandFinanceResearch(CIBFR)isaglobal
center of excellence for developing Islamic business and finance as a
scientificacademicdisciplineandforpromotingIslamicfinancialproducts,
monetaryandfiscalpolicies,andbusinessandtradepractices.BasedatThe
UniversityofNottinghamcampusinMalaysia,CIBFRlooksatthemulti-
dimensionalaspectsofIslamicbusiness,cuttingacrossthemajorthemesof
Islamic economics, Islamic finance and the Halal market. True to the
pioneering nature of the research CIBFR undertakes, the Palgrave
CIBFR Series in IslamicFinance offers empirical enquiriesinto key issues
andchallengesinmodernIslamicfinance.Itexploresissuesinsuchvaried
fields as Islamic accounting, Takaful (Islamic insurance), Islamic financial
servicesmarketing, andethical andsociallyresponsible investing.
More information aboutthisseries at
http://www.springer.com/series/15190
ShaistaArshad
Stock Markets
in Islamic Countries
fi
An Inquiry into Volatility, Ef ciency
and Integration
ShaistaArshad
UniversityofNottinghamMalaysiaCampus
Semenyih,Malaysia
PalgraveCIBFRStudiesinIslamicFinance
ISBN978-3-319-47802-9 ISBN978-3-319-47803-6(eBook)
DOI10.1007/978-3-319-47803-6
LibraryofCongressControlNumber:2016957405
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To my parents.
Thank youforeverything.
C
ONTENTS
1 Introduction 1
References 6
2 BackgroundonBusiness Cycles 7
2.1 Description ofBusiness Cycles 7
2.2 The Different Types ofCycles 9
2.3 Theories ofBusiness Cycles 9
2.3.1 RealBusiness CycleTheory 10
2.3.2 KeynesianTheory ofBusiness Cycles 11
2.3.3 Austrian BusinessCycle Theory 12
References 12
3 Overviewof the Organizationof Islamic Cooperation 15
3.1 Introduction 15
3.2 Salient Features of OICMember CountriesEconomy 17
3.2.1 Malaysia 18
3.2.2 Indonesia 18
3.2.3 Pakistan 19
3.2.4 Bangladesh 19
3.2.5 Turkey 20
3.2.6 Jordan 20
3.2.7 Egypt 21
3.2.8 Nigeria 21
3.2.9 Kuwait 21
vii
viii CONTENTS
3.2.10 TheUAE 22
3.2.11 Qatar 22
3.2.12 Oman 22
3.3 OIC Member StatesStock Markets 22
References 28
4 Vettingthe Volatility 31
4.1 Introduction 31
4.2 Why StudyVolatility? 32
4.2.1 RelationshipBetween StockMarkets and Business
Cycles 33
4.2.2 Withinthe OIC 34
4.3 Methodology 35
4.3.1 Formulating theBusiness Cycle 35
4.3.2 Decompositionof StockReturns 36
4.3.3 Volatility ofStocks 37
4.4 Data Used 37
4.5 Results and Discussions 39
4.5.1 Malaysia 44
4.5.2 Indonesia 45
4.5.3 Pakistan 47
4.5.4 Turkey 49
4.5.5 Jordan 51
4.5.6 Egypt 53
4.5.7 Kuwait 54
4.5.8 Nigeria 56
4.5.9 TheUAE 57
4.5.10 SaudiArabia 58
4.5.11 Qatar 59
4.6 Conclusion 60
References 61
5 Examiningthe Efficiency 63
5.1 Introduction 63
5.2 Importanceof Efficiency 64
5.3 Stock MarketEfficiency in theOIC 65
5.4 Theory Behind Efficient Markets 65
CONTENTS ix
5.5 Data and Methodology 68
5.5.1 TestingMarket Efficiency 68
5.6 Empirical Analysis 69
5.6.1 OverallEfficiency 70
5.6.2 Rankingof Marketsfor Major Periods 71
5.6.3 Efficiency Rankings ofIndividual Markets 74
5.7 Conclusion 83
Note 83
References 84
6 Investigatingthe Integration 85
6.1 Introduction 85
6.2 Why StudyMarketIntegration? 86
6.3 Market Integrationinthe OIC 87
6.4 Relationship BetweenBusiness Cyclesand Market
Integration 88
6.5 Theory Behind MarketIntegration 89
6.6 Data Selection 90
6.7 Methodology 91
6.7.1 InternationalCapitalAssetPricingModel(ICAPM) 91
6.7.2 Multivariate GARCH 93
6.8 Analysis andResults 94
6.8.1 Country-wise Analysis 98
6.8.2 Regional Integration 106
6.9 Conclusion 116
Notes 116
References 116
7 Conclusion 119
Index 125
L F
IST OF IGURES
Fig.3.1 GrowthtrendofGDPofOICcountries 16
Fig.3.2 NetForeigndirectinvestmentflowtotheOIC
(incurrentUS$) 17
Fig.3.3 Marketcapitalization/GDPforOICmembercountries 26
Fig.3.4 NumberoflisteddomesticcompaniesforOICmember
countries 27
Fig.3.5 Valuetraded/marketcapitalizationforOICmember
countries 28
Fig.4.1 MarketcapitalizationofOICmembercountriesin2014 39
Fig.4.2 Graphsofbusinesscyclesofsamplecountries 40
Fig.6.1 Businesscyclegraphsforeachsamplecountry 94
Fig.6.2 FMarketintegrationwithworldbenchmarkforsample
countries 97
xi