Are Islamic Indexes a Safe Haven for investors An analysis of total, directional and net volatility spillovers between conventional and Islamic indexes.

Hkiri, Besma and Hammoudeh, Shawkat and Aloui, Chaker and Yarovaya, Larisa (2017) Are Islamic Indexes a Safe Haven for investors An analysis of total, directional and net volatility spillovers between conventional and Islamic indexes. Pacific-Basin Finance Journal, 43. pp. 124-150. ISSN 0927-538X

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Official URL: https://doi.org/10.1016/j.pacfin.2017.03.001

Abstract

We examine the decoupling and contagion hypotheses on the safe haven status of Islamic indexes by investigating the total, directional and net volatility spillovers across nine regional Islamic stock indexes and their conventional counterparts, using the generalized vector autoregressive framework. We use daily data covering the period 1999 to 2014 which includes various financial crises such as those that took place in Asia, Russia, Argentina, Brazil and the United States. The results show that global financial crises strongly affect the cross-market volatility. Although the contagion hypothesis is evident for both Islamic and conventional indexes, the findings also suggest the presence of a decoupling of the Islamic indexes from their conventional counterparts during turbulent periods. The results provide several useful implications for policy makers and portfolio managers seeking to diversify their portfolios and to hedge the market risk, confirming that Islamic financial indexes are a safe haven for investors during financial crises. Furthermore, paper reports significant time-varying patterns in the volatility spillovers for all the Islamic and conventional stock indexes and point out the stress transmitters and receivers.

Item Type: Journal Article
Keywords: islamic indexes, safe haven, volatiltiy spillovers
Faculty: Lord Ashcroft International Business School
Depositing User: Dr Larisa Yarovaya
Date Deposited: 30 May 2017 09:41
Last Modified: 30 May 2017 09:41
URI: http://arro.anglia.ac.uk/id/eprint/701770

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