The Granger-causal relationship between macroeconomic variables and the Shariah (Islamic) Index (... more The Granger-causal relationship between macroeconomic variables and the Shariah (Islamic) Index (EMAs) of Malaysian stock market returns is an important issue to investigate. In this paper we attempt to examine the long-term theoretical relationship and Granger-causal (or lead-lag) relationship between selected macroeconomic variables and the FTSE Bursa Malaysia EMAS Shariah Index. The standard time series techniques are used. The paper concludes and identifies a cointegrating theoretical relationship along with the identification of Granger-causality (i.e., exogeneity and endogeneity of the variables) and advises the policy makers how much the studied variables are important in the pricing of the Islamic Indexes. The findings tend to indicate that the shariah index can't be affected by the macro variables since it leads (rather than lags) the macro variables. Implications of the findings are immense for the policy makers. Also the findings of this paper present an opportunity to further expand the research in this field as well as extend it to other Shariah Indices in the Gulf and other Islamic markets.
This study aims to examine the short-run and long-run relationship between economic growth, energ... more This study aims to examine the short-run and long-run relationship between economic growth, energy consumption, financial development, capital formation and population by using data set of Malaysia for the period 1971-2014. An emerging economy like Malaysia has high energy consumption which is intensified by its growing population. Economic growth and energy consumption in Malaysia have been rising over the past several years. The motivation to this study is related to four policy objectives of Malaysia; economic growth, financial development, energy conservation and reduction on pollution. The auto regressive distributed lag (ARDL) bounds testing approach to test the long run relationship among the variables, while short run dynamics were investigated using the Vector Error Correction Model (VECM). Variance decomposition (VDC) technique was used to provide Granger causal relationship between the variables.The findings suggest that energy consumption is influenced by economic growth and financial development, both in the short and the long run. The population-energy relationship however only holds in the long run. The results have important policy implications for balancing economic growth vis-à-vis energy consumption for Malaysia, and other emerging nations to explore new and alternative sources of energy to meet the rising demand of energy to sustain economic growth.
In theory, Islamic banking is different from conventional banking, since the former is supposedly... more In theory, Islamic banking is different from conventional banking, since the former is supposedly based on a risk-sharing or profit-and-loss sharing paradigm, while the latter is based on interest rate and maximisation of wealth. However, many studies have claimed that in real practice, Islamic banking performance tends to imitate that of conventional banks. Through the standard time series techniques, this paper aims to study the impact of conventional fixed rates (CFR) and overnight policy rate (OPR) on the Islamic investment deposit profit rates (PR) of banks in Malaysia. This paper is also different from previous studies due to the inclusion of less tested variables such as, the ratio of Islamic deposits to total deposits (IDTD) as a proxy for the impact of market share on the determination of investment account rates, and the consumer price index (CPI) as a proxy of real economy on PR. Unexpectedly, it is found that PR is not strongly cointegrated with both CFR and OPR. It is still too soon to say that the prohibition of benchmarking and profit smoothing by Islamic Financial Services Act (IFSA) effective July 2015 might have had something to do with this. On the other hand, based on the VECM and VDC tests, PR is highly affected by the Islamic interbank rates. Based on this, policy makers could explore further on probable benchmarking between the banking sector and interbank money market within the Islamic financial segment.
This study attempts to investigate whether share price index, specifically KOSPI of Korean Exchan... more This study attempts to investigate whether share price index, specifically KOSPI of Korean Exchange, can be considered as a mirror or reflection of economic activities in Korea. The purpose is to make a finer point with respect to the relationship between economic growth and stock market especially in terms of stock prices. The present study proceeds with a single point investigative agenda as to what is the relationship between the health of the real economy and the health of the stock market? Does a rally in share prices reflect better health of the economy or it is the pink economic health that causes share prices to change? We have examined the causal relationships between the share price index and other crucial macroeconomic variables namely money supply, exchange rate, consumer price index, and money market rate for the reason of right and robust model specification. The standard time series techniques have been employed. The present study reports causality running from economic growth to share price index and not the other way round. It may therefore be stated that the stock markets in Korea are demand driven and industry led which means that demand for greater equity finance is led by higher and improved economic performance. That is, the state of the economy has a bearing on the share prices but the health of the stock market in the sense of a rising share price index is not reflective of an improvement in the health of the economy. In other words, a Bull Run or rising prices in the stock market cannot be taken to be a leading indicator of the revival of the economy in Korea.
Review of Pacific Basin Financial Markets and Policies, Mar 1, 2006
The focus of this paper is to test the cointegrating and Granger-causal relationships between Aus... more The focus of this paper is to test the cointegrating and Granger-causal relationships between Australian short-run interest rate securities and those of the UK, US, Japan, Hong Kong, Singapore and New Zealand. A relatively new methodology known as Long Run Structural Model (LRSM) (Pesaran and Shin, 2002) followed by vector error-correction model, generalized variance decompositions, generalized impulse response, and persistence profile have been used. The findings tend to suggest that Australia's short-term interest rates are cointegrated with those of its major trading partners. The results of this paper indicate that the ability of Australian policy makers to target and manipulate domestic interest rates may be limited and that they should look to the policy decisions of the US and Japan in particular when setting domestic policy.
This paper makes an initial attempt to investigate the risk spillover of the Russia-Ukraine war a... more This paper makes an initial attempt to investigate the risk spillover of the Russia-Ukraine war and oil price on Asian Islamic Stocks and bitcoin. We apply quantile-based connectedness measures using daily return data covering four Asian Islamic stock indices-oil, gold, bitcoin, and war panic-from February 1, 2022, to July 15, 2022. The results indicate higher connectedness in the upper and lower quantiles compared to the middle quantile, which implies that return shocks react more sharply during high war panic.
The Granger-causal relationship between macroeconomic variables and the Shariah (Islamic) Index (... more The Granger-causal relationship between macroeconomic variables and the Shariah (Islamic) Index (EMAs) of Malaysian stock market returns is an important issue to investigate. In this paper we attempt to examine the long-term theoretical relationship and Granger-causal (or lead-lag) relationship between selected macroeconomic variables and the FTSE Bursa Malaysia EMAS Shariah Index. The standard time series techniques are used. The paper concludes and identifies a cointegrating theoretical relationship along with the identification of Granger-causality (i.e., exogeneity and endogeneity of the variables) and advises the policy makers how much the studied variables are important in the pricing of the Islamic Indexes. The findings tend to indicate that the shariah index can't be affected by the macro variables since it leads (rather than lags) the macro variables. Implications of the findings are immense for the policy makers. Also the findings of this paper present an opportunity to further expand the research in this field as well as extend it to other Shariah Indices in the Gulf and other Islamic markets.
This study aims to examine the short-run and long-run relationship between economic growth, energ... more This study aims to examine the short-run and long-run relationship between economic growth, energy consumption, financial development, capital formation and population by using data set of Malaysia for the period 1971-2014. An emerging economy like Malaysia has high energy consumption which is intensified by its growing population. Economic growth and energy consumption in Malaysia have been rising over the past several years. The motivation to this study is related to four policy objectives of Malaysia; economic growth, financial development, energy conservation and reduction on pollution. The auto regressive distributed lag (ARDL) bounds testing approach to test the long run relationship among the variables, while short run dynamics were investigated using the Vector Error Correction Model (VECM). Variance decomposition (VDC) technique was used to provide Granger causal relationship between the variables.The findings suggest that energy consumption is influenced by economic growth and financial development, both in the short and the long run. The population-energy relationship however only holds in the long run. The results have important policy implications for balancing economic growth vis-à-vis energy consumption for Malaysia, and other emerging nations to explore new and alternative sources of energy to meet the rising demand of energy to sustain economic growth.
In theory, Islamic banking is different from conventional banking, since the former is supposedly... more In theory, Islamic banking is different from conventional banking, since the former is supposedly based on a risk-sharing or profit-and-loss sharing paradigm, while the latter is based on interest rate and maximisation of wealth. However, many studies have claimed that in real practice, Islamic banking performance tends to imitate that of conventional banks. Through the standard time series techniques, this paper aims to study the impact of conventional fixed rates (CFR) and overnight policy rate (OPR) on the Islamic investment deposit profit rates (PR) of banks in Malaysia. This paper is also different from previous studies due to the inclusion of less tested variables such as, the ratio of Islamic deposits to total deposits (IDTD) as a proxy for the impact of market share on the determination of investment account rates, and the consumer price index (CPI) as a proxy of real economy on PR. Unexpectedly, it is found that PR is not strongly cointegrated with both CFR and OPR. It is still too soon to say that the prohibition of benchmarking and profit smoothing by Islamic Financial Services Act (IFSA) effective July 2015 might have had something to do with this. On the other hand, based on the VECM and VDC tests, PR is highly affected by the Islamic interbank rates. Based on this, policy makers could explore further on probable benchmarking between the banking sector and interbank money market within the Islamic financial segment.
This study attempts to investigate whether share price index, specifically KOSPI of Korean Exchan... more This study attempts to investigate whether share price index, specifically KOSPI of Korean Exchange, can be considered as a mirror or reflection of economic activities in Korea. The purpose is to make a finer point with respect to the relationship between economic growth and stock market especially in terms of stock prices. The present study proceeds with a single point investigative agenda as to what is the relationship between the health of the real economy and the health of the stock market? Does a rally in share prices reflect better health of the economy or it is the pink economic health that causes share prices to change? We have examined the causal relationships between the share price index and other crucial macroeconomic variables namely money supply, exchange rate, consumer price index, and money market rate for the reason of right and robust model specification. The standard time series techniques have been employed. The present study reports causality running from economic growth to share price index and not the other way round. It may therefore be stated that the stock markets in Korea are demand driven and industry led which means that demand for greater equity finance is led by higher and improved economic performance. That is, the state of the economy has a bearing on the share prices but the health of the stock market in the sense of a rising share price index is not reflective of an improvement in the health of the economy. In other words, a Bull Run or rising prices in the stock market cannot be taken to be a leading indicator of the revival of the economy in Korea.
Review of Pacific Basin Financial Markets and Policies, Mar 1, 2006
The focus of this paper is to test the cointegrating and Granger-causal relationships between Aus... more The focus of this paper is to test the cointegrating and Granger-causal relationships between Australian short-run interest rate securities and those of the UK, US, Japan, Hong Kong, Singapore and New Zealand. A relatively new methodology known as Long Run Structural Model (LRSM) (Pesaran and Shin, 2002) followed by vector error-correction model, generalized variance decompositions, generalized impulse response, and persistence profile have been used. The findings tend to suggest that Australia's short-term interest rates are cointegrated with those of its major trading partners. The results of this paper indicate that the ability of Australian policy makers to target and manipulate domestic interest rates may be limited and that they should look to the policy decisions of the US and Japan in particular when setting domestic policy.
This paper makes an initial attempt to investigate the risk spillover of the Russia-Ukraine war a... more This paper makes an initial attempt to investigate the risk spillover of the Russia-Ukraine war and oil price on Asian Islamic Stocks and bitcoin. We apply quantile-based connectedness measures using daily return data covering four Asian Islamic stock indices-oil, gold, bitcoin, and war panic-from February 1, 2022, to July 15, 2022. The results indicate higher connectedness in the upper and lower quantiles compared to the middle quantile, which implies that return shocks react more sharply during high war panic.
Bitcoin is a form of digital currency that is circulating without the backing of any central bank... more Bitcoin is a form of digital currency that is circulating without the backing of any central bank and monitoring authority. Therefore, sceptics regularly question the status of Bitcoin as a legal tender. Nevertheless, due to increasing popularity and importance of Bitcoin, practitioners and researchers have recently started to assess Bitcoin from the perspective of business, economics and finance. This paper explores possibilities of using Bitcoin as a portfolio optimisation strategy for Islamic fund managers. We use three recent and appropriate methodologies: M-GARCH-DCC, Continuous Wavelet Transforms (CWT), and Maximum Overlap Discrete Wavelet Transform (MODWT). The results significantly tend to indicate that Bitcoin and Shari'ah stock indices are lowly and negatively correlated, suggesting that Islamic stock investors can benefit from diversification with Bitcoin and that the fundamentals of such crypto-currencies can be further investigated for the benefit of Islamic capital markets.
The purpose of this chapter is to analyze the possible portfolio diversification opportunities be... more The purpose of this chapter is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions’ Islamic markets; namely USA, Europe, and BRIC. This study makes the initial attempt to fill in the gaps of previous studies by focusing on the proxies of global Islamic markets to identify the correlations among those selected markets by employing the recent econometric methodologies such as multivariate generalized autoregressive conditional heteroscedastic–dynamic conditional correlations (MGARCH–DCC), maximum overlap discrete wavelet transform (MODWT), and the continuous wavelet transform (CWT). By utilizing the MGARCHDCC, this chapter tries to identify the strength of the time-varying correlation among the markets. However, to see the time-scale-dependent nature of these mentioned correlations, the authors utilized CWT. For robustness, the authors have applied MODWT methodology as well. The findings tend to indicate that the Asian investors have better portfolio diversification opportunities with the US markets, followed by the European markets. BRIC markets do not offer any portfolio diversification benefits, which may be explained partly by the fact that the Asian markets cover partially the same countries of BRIC markets, namely India and China. Considering the time horizon dimension, the results narrow down the portfolio diversification opportunities only to the short-term investment horizons. The very short-run investors (up to eight days only) can benefit through portfolio diversification, especially in the US and European markets. The above-mentioned results have policy implications for the Asian Islamic investors (e.g., Portfolio Management and Strategic Investment Management).
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Papers by Mansur Masih