International diversification among Islamic investments: is there any benefit

Bahlous, Mejda; Yusof, Rosylin Mohd

doi:10.1108/mf-08-2013-0225

Cited by 18 publications

(23 citation statements)

References 33 publications

(29 reference statements)

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“…Furthermore, the main criteria is prohibition of riba (interest), so the Islamic investors are banned to invest their capital on the business activities which have fixed interest rate. Also, screening is implemented on leverage ratio (debt/market value of equities) which not more than 33%, non-permissible income which not exceed 15% from the total revenue, and the most of its assets can not be originated by the receiveables (Bahlous and Yusof, 2014). Daftar Efek Syari'ah (DES) is list of the complied-stocks based on screening process in Indonesia conducted by Dewan Syariah Nasional (DSN-MUI) and Otoritas Jasa Keuangan (OJK).…”

Section: The Literature Review and Theoritical Backgroundmentioning

confidence: 99%

“…Stock screening becomes more important. Based on Bahlous and Yusof (2014), Islamic investors only willing to invest their capital in the companies or industries complied with Shari'ah law. In conceptual framework conducted by the Financial Accounting Standards Boards (FASB) stated that the main objective of financial report is to provide the information for their users, so it can be such a consideration to predict the future cash flow (Rees and Thomas, 2010).…”

Section: Introductionmentioning

confidence: 99%

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Stock Returns and Liquidity Changes Around the Screening Announcement: An Empirical Study in Indonesia

Rahmasuciana

Alwahidin

Utomo³

et al. 2016

GReviewIEB

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This paper aims to identify and analyze the volatility of stock returns and the changes of liquidity around the announcement of Shari’ah stock screening published by Otoritas Jasa Keuangan (OJK) and Dewan Syariah Nasional (DSN-MUI). The announcement is consist of stocks that become the constituent of ISSI (Indonesia Shari’ah Stock Index) and the stocks out from ISSI in each period. The number of data are 341 emitens, divided into two categories. The first category was 196 stocks that out from the composition of ISSI, and the second was shari’ah stock from 145 emitens which categorized as part of ISSI from 2011 to 2016. The statistical method (t-test) is used to analyze the change of stock returns and the change of liquidity in 14 days around the announcement (6 days pre- and post announcement). The result shows that Shari’ah compliant stocks over 6 years around the announcement have no difference in return and have negative sign for both the Shari’ah stocks and the stocks out from ISS. It may caused by the intention of Islamic investor which invest their capital based on the compliance of Shari’ah, so the returns do not become the most important one. Interestingly, on the other hand, the liquidity change of stocks which out of ISSI has negative significant difference on the days after the announcement of screening. It indicates that the non-compliant stocks have negative in change of liquidity or have significant liquidity declining after the announcement. Also, in fact Islamic invetors are more concern in the list of stocks that out from ISSI and the stock returns become less important to them than the compliance of investment. Thess findings confirm the issue that the screening is not effecting the expected return of investors. Besides, this study tells that the screening is perceived as important information by the investors in making decisions. Thus, the next studies are needed to investigate the effect of long-term investment on shari’a stock and the factors that influence the shari’a stock return during the period of announcement.

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Section: The Literature Review and Theoritical Backgroundmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Stock Returns and Liquidity Changes Around the Screening Announcement: An Empirical Study in Indonesia

Rahmasuciana

Alwahidin

Utomo³

et al. 2016

GReviewIEB

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“…Investors can bring about an even more substantial reduction in the risk if they carry an internationally diversified portfolio. An internationally diversified portfolio can prove itself more efficient than the domestic ones on the global frontier (Bahlous & Yusof, 2014). By diversifying across different countries where economic cycles are not perfectly correlated, investors can typically minimize the variability of their returns.…”

Section: Introductionmentioning

confidence: 99%

International Stock Market Diversification among BRICS-P: A Cointegration Analysis

Arif¹,

Iqbal²,

Ali³

et al. 2017

jms.2014

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This study explores the benefits associated with the international portfolio diversification among BRICS-P economies. The dynamics of the globe are changing, and the economic transformations have made the emerging economies a prominent center for investments. The possibility of international diversification among the BRICS-P economies may help the investors in maximizing their utilities by earning a higher return with a given level of risk. To assess the benefits of diversification and to explore the long term and short tern dynamics of the selected stock markets, this study uses Auto Regressive Distributive Lag (ARDL) approach. The findings show that substantial portfolio diversification benefits exist when the funds of Brazil, Russia, South Africa and China are merged. The study also found that Pakistan and India's funds are co-integrated, and that the prospect of diversification exists if the funds of these two economies are mixed. The results will help the investors in constructing their portfolios by merging the funds of the selected economies, because having a diversified portfolio leads to better risk return performance than having a portfolio with only native funds.

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“…Among them including the study of Sidek (2011), Majdoub andMansour (2014), Saiti, et al (2014), and Bahlous and Yusof (2014). Rahman and Sidek (2011) investigated the effect of US subprime crises on the ASEAN-5 stock markets.…”

Section: Empirical Studies On Volatility Spilloversmentioning

confidence: 99%

“…From their study, as far as US-based investors is concerned, the Islamic MSCI indexes of Malaysia, Hong Kong, Japan, and GCC-countries appear to have low conditional correlation with the US market. Bahlous and Yusof (2014) examine the diversification benefits of Islamic funds in Asia Pacific and Middle East and Northern Africa (MENA) region. The study finds that there is a negative correlation across Islamic funds in those regions, being so the diversification benefit is persistence.…”

Section: Empirical Studies On Volatility Spilloversmentioning

confidence: 99%

Testing the conditional correlations and volatility spillovers between US and ASEAN Islamic stock markets: A Multivariate GARCH Analysis

Sakti

2015

GReviewIEB

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This study examines the conditional correlations and volatility spillovers between the US and ASEAN Islamic stock markets. The empirical design uses MSCI (Morgan Stanley Capital International) Islamic indexes as it adopted stringent restriction to include companies in sharia list. By using a three multivariate GARCH models (BEKK, diagonal VECH, and CCC model), we find evidence of returns and volatility spillovers from the US to the ASEAN Islamic stock markets. However, as the estimated time-varying conditional correlations and volatilities indicate there is still a room for diversification benefits, particularly in the single markets. The Islamic MSCI of Thailand, Indonesia, and Singapore are less correlate to the US MSCI Islamic index. The implication is that foreign investors may benefit from the reduction of risk by adding the Islamic stocks in those countries.

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International diversification among Islamic investments: is there any benefit

Cited by 18 publications

References 33 publications

Stock Returns and Liquidity Changes Around the Screening Announcement: An Empirical Study in Indonesia

Stock Returns and Liquidity Changes Around the Screening Announcement: An Empirical Study in Indonesia

International Stock Market Diversification among BRICS-P: A Cointegration Analysis

Testing the conditional correlations and volatility spillovers between US and ASEAN Islamic stock markets: A Multivariate GARCH Analysis

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