Pandemic Attack and Islamic Stocks Index: A Cross Country Analysis

Abstract

The impact of Covid-19 has triggered the current global economic downturn affecting all aspects of the economy including the Islamic stock index. This study aims to determine the model for forecasting the index. The Islamic stock index is used in six countries through adopting the Autoregressive Conditional Heteroscedasticity -Generalized Autoregressive Conditional Heteroscedasticity (ARCH-GARCH) method on daily data over the period January 2020 to October 2020. The risk level of each index was found to be influenced by the residual value from the previous day. The forecasting revealed the tendency of all stock prices to decline. These are associated with impacts of the Covid-19 pandemic on current and future economic performance. Investors need to assess the sector's fundamentals and the individual stocks in question, that are potential winners with propensity to recover and grow well once the market rebounds. They also need to continuously track the development of the pandemic in tandem with the economic sector and thus make the necessary adjustments at every step of the investment process.

How Did The Financial Markets Respond to The COVID-19 Pandemic? Empirical Evidence from BRICS Countries

“…There are studies done across the globe on the impact of the COVID-19 pandemic on stock markets and returns (Zhang et al, 2020;Pavlyshenko, 2020;Sharif et al, 2020;Topcu & Gulal, 2020;Albulescu, 2020;Mubarok & Al Arif, 2021), the effect of the pandemic on the economy (Ayittey et al, 2020;Estrada et al, 2020;Luo & Tsang, 2020), COVID-19 and financial markets (Baig et al, 2020;Gormsen & Koijen, 2020;He et al, 2020;Singh et al, 2020;Zaremba et al, 2020;Zeren & Hizarci, 2020). It is observed that stock markets are interdependent in various countries as the stock markets more or less behaved the same (Amar et al, 2020;Cepoi, 2020;Okorie & Lin, 2021).…”

COVID-19 and Its Impact on Islamic Equity Mutual Funds in Indonesia

“…According to Fatimala (2021), there are differences in stock prices and trading volumes before and after the announcement in Indonesia. Mubarok and Arif (2021) showed a significant decline in the volatility level of the Islamic stock index due to pandemic, where stock prices were lower than in previous years.…”

The Impact of Covid-19 on Islamic Economics & Finance Industry

“…For the capital market specifically for the Islamic capital market, for investors, according to Mubarok & Al Arif (2021), Investors need to assess fundamental sectors and question individual stocks, which ones have the potential to win and tend to recover grow well after the market rebound. Furthermore, they also need to continue to track the development of the pandemic and the economic sector so that that step adjustment can be made in each investment process.…”

“…Research conducted by Meixi & Yitong (2020) shows that the early stages of the outbreak in Xinguan had a short-term and significant negative impact on the Chinese capital market, and the effect peaked on the second day. Mubarok & Al Arif (2021) examined the Islamic stock index used in six countries, and the results showed a tendency for all stock prices to decline. This is related to the impact of the COVID-19 pandemic on current and future economic performance.…”