Impact of interest rate surprises on Islamic and conventional stocks and bonds

Akhtar, Shumi; Akhtar, Farida; Jahromi, Maria; John, Kose

doi:10.1016/j.jimonfin.2017.09.003

Cited by 33 publications

(20 citation statements)

References 48 publications

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“…On the other hand, a growing and interesting literature has discussed the potential dual effects of anticipated and unanticipated shocks in affecting real variables, mostly in the context of Dynamic stochastic general equilibrium (DSGE) models. For instance, although Schmitt‐Grohe and Uribe () provide important guidance on how to identify and estimate unanticipated exogenous shocks to economic fundamentals, Ali and Anwar () decompose terms of trade shocks to aggregate output as anticipated and unanticipated shocks, and Akhtar, Akhtar, Jahromi, and John () investigate the effect of interest rate surprises on asset and bond prices.…”

Section: Discussionmentioning

confidence: 99%

Do foreign portfolio capital flows affect domestic investment? Evidence from Brazil

2018

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Although there are several direct and indirect theoretical channels through which foreign capital flows may affect domestic investment, empirical evidence remains inconclusive. In this paper, we employ a VARX framework to assess the impact of equity foreign portfolio investment (EFPI) on domestic investment growth, employing monthly series for the Brazilian economy. Our results suggest that EFPI played a nonnegligible role in explaining aggregate investment fluctuations, but only before the 2008 global financial crisis. After the crisis, a period marked first by a shift in economic policy in 2008–2009, with substantial increases in government intervention, followed by deterioration in the institutional outlook and political stability in 2014–2015, mostly against the backdrop of the Petrobras corruption scandal, unexpected shocks to EFPI no longer led any real effects on investment growth. Although, in general, our results vouch for beneficial effects of equity capital flows on investment, this virtuous relationship is likely disturbed by interventionist policies and political unrest.

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Section: Discussionmentioning

confidence: 99%

Do foreign portfolio capital flows affect domestic investment? Evidence from Brazil

2018

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“…Selain itu (Akhtar et al, 2017) dalam penelitiannya menemukan bahwa suku bunga cenderung memiliki dampak yang lebih kecil pada pengembalian dan volatilitas Islami daripada obligasi konvensional karena obligasi Islam terstruktur untuk menghindari eksplisit suku bunga. Utang berbasis bunga tidak hanya mengakar, tetapi juga sangat terkait dengan alat eksploitatif lainnya yang lazim di tangan beberapa orang terpilih untuk mempertahankan kendali mereka atas politik, ekonomi dan sosial (Khan & Bhatti, 2014).…”

Section: Utang Berbasis Bunga Mendorong Krisisunclassified

Bagaimana Utang Mendorong Terjadinya Krisis? Solusi dari Sistem Keuangan Islam

Harahap

Elanda²,

Majid

et al. 2022

reslaj

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Interest-based debt is prohibited in Islam because of its exploitative nature. The main purpose of implementing Islamic sharia in financial activities is to eliminate injustice and inequalities in financial transactions. The main characteristic of Islamic finance is the prohibition of charging interest, also known as usury. The findings in this study that debt that was continuously extended during the crisis did not have the effect of restoring the economy to normal conditions, instead providing an impetus for a continuous crisis. Interest-based debt is a dangerous weapon to exploit and extort poor people who need venture capital. Furthermore, the high interest in using interest-based debt is exploited by the surplus capital to increase their wealth. Interest-based debt with high costs weakens the economy, although from a capital turnover perspective it looks bigger. The solution of the Islamic financial system with an interest-free loan scheme (Qardhul Hasan) is an alternative that has been proven to provide an incentive to increase welfare. Qardhul Hasan with a low cost becomes effective in increasing output, absorbing employment, and maintaining a low inflation rate without creating negative side effects in the economy. Keywords: debt, interest, crisis, qardhul hasan

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“…From the major finance theories perspective (the second group), sukuk literature conclusively addresses beneficial effects from diversifying portfolio, choosing sukuk over conventional bonds, and investors' religiosity (Alam et al, 2013;Nagano, 2017;Mohamed et al, 2017;Azmat, Skully, & Brown, 2014;Klein, Turk, & Weill, 2017;Shafron, 2018). Meanwhile, for the third group, sukuk is mostly linked to how much the stock market responds to sukuk and bonds (Godlewski et al, 2013;Fauzi, Foo, & Basyith, 2017), how sukuk and bonds show inter-temporally their co-movements and linkages (Aloui, Hammoudeh, & Hamida 2015a;Alaoui, Dewandaru, Rosly, & Masih, 2015;Sclip, Dreassi, Miani, & Paltrinieri, 2016), what are the changes of sukuk structure due to the global financial crisis and other influential economic events, how different price regimes lead to the different correlation between the stock market and sukuk (Naifar, Hammoudeh, & Al dohaimanae, 2016;Aloui, Hammoudeh, & Hamida, 2015b, 2015c, and how interest rate impacts the sukuk market (Akhtar, Akhtar, Jahromi, & John, 2017).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Do sukuk ratings non-contingently affect stock returns? Evidence from Indonesia and Malaysia

Qizam

2021

EBER

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The objective of the article is to investigate two issues. First, whether the Islamic bond (sukuk) ratings are the key determinant in affecting stock returns and, second, whether firm-characteristic variables moderate the sukuk ratings effect on stock returns. Research Design & Methods: This study applied the panel estimated generalized least squares (EGLS) regression for two samples (from Indonesia and Malaysia) spanning two years, 2015-2016, for all variables, except for the intrinsic-value variable which spanned eight years, 2009-2016. Findings: The results show that the direct and positive effect of sukuk ratings on stock returns are significantly present in Malaysia but not in Indonesia, while the positive and significant moderating effects of firm-characteristic variables -especially leverage and intrinsic value of the firm -are more pronounced in the positive sukuk rating-stock return relationship in Indonesia than in Malaysia. Implications & Recommendations:The types of firm-characteristic variables involved in determining the effect of sukuk ratings on stock returns depend on the country's characteristics. As a result, adopting sukuk ratings to determine stock returns is not constant but, instead, it is contingent -to an extent -on other variables: firm-characteristic variables. These results suggest that still many factors should be explored so as to reach a better judgment on the quality of credit, including sukuk. Contribution & Value Added: While most previous studies employed the event-study method and did not specifically consider firm-characteristic effects on analysing the relationship between sukuk ratings and stock returns, this study sought to reveal whether sukuk ratings are the key determinant in affecting prices (or stock returns), and the extent to which firm-characteristic variables moderate the relationship between sukuk ratings and stock returns. Article type:research article

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Impact of interest rate surprises on Islamic and conventional stocks and bonds

Cited by 33 publications

References 48 publications

Do foreign portfolio capital flows affect domestic investment? Evidence from Brazil

Do foreign portfolio capital flows affect domestic investment? Evidence from Brazil

Bagaimana Utang Mendorong Terjadinya Krisis? Solusi dari Sistem Keuangan Islam

Do sukuk ratings non-contingently affect stock returns? Evidence from Indonesia and Malaysia

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