Background: This study aims to investigate the extent to which the conditional volatilities of both Shari'ah compliant stock and conventional stock are related to those of interest rate and exchange rate in the emerging economy of Pakistan. Methods: We used KMI 30 and KSE 100 indices for Islamic and conventional stock for the period of July 2008 to November 2013. We employed Generalized Autoregressive Conditional Heteroskedastic in the mean (GARCH-M) model. This framework relaxes constancy assumption of classical linear regression (CLRM) model and allows exchange rate and interest rate volatility to evolve over time. The GARCH-M framework also reveals results about risk-return trade-off in the context of both Islamic and conventional stock indices. Results: The findings show positive and statistically significant effect of interest rate volatility on KSE-100, whereas KMI-30 remains unaffected by the same. Exchange rate volatility is found to be significant for both conventional and Islamic indices. The relationship of risk coefficient (γ) and stocks returns, as expected, is positive and statistically significant for both KMI-30 and KSE-100. This result is consistent with the theory of risk-return trade-off. The results of parametric t-test show significant difference between returns of both indices. This implies that Shari'ah compliant stock index (KMI-30) of Pakistan underperforms its conventional counterpart. Conclusion: By using different performance measures (Sharp ratio, Jensen alpha, Treynor ratio), this study also investigates the hypothesis that Islamic stock index has inferior performance compared with unscreened conventional counterparts due to availability of a smaller investment universe, increased monitoring costs, and limited diversification.

This study investigated the impact of Muslim Holy Days on daily stock returns of Asian financial markets for a period of [2001][2002][2003][2004][2005][2006][2007][2008][2009][2010][2011][2012][2013][2014]. These markets include Pakistan, Bahrain, Saudi Arabia, and Turkey. The study has tried to isolate the effect of Gregorian calendar anomalies from Muslim Holy Days to certify that the documented effect is actually a result of Muslim Holy Days rather than Gregorian calendar anomalies. Pooled fixed/random effect Panel Regression is used to check the underlined effect. The results reveal that Eid-ul-Fitr is the only Holy day, which has significant positive effect on stock returns of Asian markets, while all other Holy Days have no effect. Friday is the only Gregorian calendar anomaly, which exists in Asian markets. These results provide support to the fact that both Islamic and Gregorian calendar anomalies exist in Asian markets. PUBLIC INTEREST STATEMENTThis study attempts to investigate the impact of five Muslim Holy Events (Eid-ul-Fitr, Eid-ul-Adha, Eid-Melad-un-Nabi, Ramadan and Ashura) on stock markets of Pakistan, Bahrain, Saudi Arabia, and Turkey. The results reveal that Eid-ul-Fitr is the only Holy day, which has significant positive effect on stock returns of Asian markets, while all other Holy Days have no effect.

Purpose -The purpose of this paper is to examine the impact of base lending rate (BLR), consumer prices, gross domestic product, money supply (M 3 ), Karachi stock exchange composite index, KIBOR, and profit rate of Islamic banks on deposits of both conventional and Islamic banks in Pakistan. Design/methodology/approach -Quarterly data of six years (2006)(2007)(2008)(2009)(2010)(2011) are obtained from 30 banks, consisting of 25 conventional and five Islamic banks. The short-run as well as long-run relationships among these variables are examined by utilizing advanced time series approach. Bounds testing and autoregressive distributed lag have been used to examine cointegration and error correction framework for short-run dynamics. Findings -The empirical results reveal that variables such as interest rate of conventional banks, profit of Islamic banks, consumer prices, M 3 , and BLR have different impact on conventional and Islamic bank deposits. Depositors of conventional and Islamic banks are sensitive to the returns received on deposits. A boost in interest rate increases the deposits of conventional banks but decreases those of Islamic banks. Originality/value -This study signifies that customers of Islamic banks are motivated by profit. This indicates the normal behavior of customers, hence endures the substitution effect in conventional system. The study has important implications for Islamic banks to offer more competitive rates of profit with respect to the interest rate of conventional banks in order to collect more deposits. It also identifies relevant policy implication for the central bank of the country.

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This study investigates the impact of terrorism on stock markets in SAARC countries during 2000-2015. An event-study analysis and fixed-effect regression technique are employed to assess whether the impact of various terrorist attacks on the stock market returns of 'highly affected' countries differs from that of 'less affected' countries in the SAARC region. This study has important implications for policy-makers in relevant countries to combat terrorism and build investor confidence.

Abstract:In this study, we focused on analysing and differentiating the determinants of conventional insurance and Takāful demand across ASEAN and Middle East Regions. We used panel data econometrics on a sample of 14 Asian countries having both conventional insurance and Takāful over the period [2005][2006][2007][2008][2009][2010][2011][2012][2013][2014]. We applied fixed and random effect regression models to assess the impact of macroeconomic and demographic factors on conventional insurance and Takāful demand. Income and financial sector were found to have significant positive impact on insurance demand across all regions. On the other hand, dependency ratio was found to be negatively affecting Takāful demand across all regions while inflation shows positive impact. Urbanization was found to be significant positive impact on both conventional insurance and Takāful demand. Financial sector development positively triggers the insurance and Takāful demand across ASEAN region, while it triggers conventional insurance demand only in Middle East Region. Education shows negative impact on Takāful demand across both regions while it shows positive impact on insurance demand in Middle East. The study recognises the key role of urbanization and education in creating awareness to enhance Takāful demand in large populated countries of ASEAN and South Asia.

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Highlights We compare the demand for conventional and Islamic insurance products  Demand for Islamic insurance has been more resilient during the GFC  The Islamic insurance demand is found to be unrelated to the saving rate  Islamic insurance in the ASEAN region is deemed as a substitute to the conventional AbstractIn this paper we compare the Islamic insurance industry (Takaful) to the conventional insurance across 14 countries over the 2005 -2014 period. Our methodology relies on panel regressions and accounts for the periods during and post the global financial crisis (GFC). Specifically, we investigate: i) the difference in the insurance demand dynamics of the two insurance types; ii) if Islamic insurance demand has been boosted in the period that followed the crisis. To allow for cross-country heterogeneities we form subsamples of high/low insurance regions and ASEAN/Middle East. We find Islamic and conventional insurance demand to be negatively affected by GDP/capita, albeit the Islamic showing a greater resilience during crisis. A negative link between conventional insurance and saving rate shows that conventional saving products work as substitutes to conventional insurance. Higher average income is positively (negatively) related to Islamic insurance demand in the Middle East (ASEAN), a finding plausibly related to the different practices relating to Islamic finance in the two regions.