Volatility spillover and hedging effectiveness among China and emerging Asian Islamic equity indexes |
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| Institution: | 1. Institut Supérieur de Gestion, 2000 Bardo, University of Tunis, Tunisia;2. LAREQUAD FSEG de Tunis, University of Tunis El Manar, Tunisia;1. INCEIF, The Global University of Islamic Finance, Lorong University A, 59100 Kuala Lumpur, Malaysia;2. FML Reliance, New York, NY 10022, USA;1. Indian Institute of Technology Kanpur, Kanpur, UP 208016, India;2. School of Business, Western Sydney University, Locked Bag 1797, Penrith, NSW 2751, Australia;1. Business School, Hunan University, Changsha 410082, China;2. Center of Finance and Investment Management, Hunan University, Changsha 410082, China;3. School of Business, East China University of Science and Technology, Shanghai 200237, China;4. Center for Polymer Studies and Department of Physics, Boston University, Boston, MA, 02215, USA |
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| Abstract: | We study the volatility spillover between China and Asian Islamic stock markets. We use a sample of six Islamic MSCI indices from the Asian region, namely China, India, Malaysia, Indonesia, Korea and Thailand obtained from MSCI (Morgan Stanley Capital International). In this paper we analyze the importance of considering spillover effects between emerging Asian Islamic indexes based on the Bivariate VARMA-BEKK-AGARCH model of McAleer et al. (2009), which includes spillover and asymmetric effects. We compute after the effectiveness of portfolio diversification based on the conditional volatility of returns series. Results show a significant positive and negative return spillover from China to selected Asian Islamic stock market and bidirectional volatility spillovers between China, Korea and Thailand Islamic market showing evidence of short-term predictability on Islamic Chinese stock market movements. However there is no short term volatility persistence in India, Indonesia and Malaysia. GARCH results show no persistence in volatility spillover effect in long term from Chinese to Indian, Indonesian and Korean Islamic stock market. Our findings are beneficial for international portfolio diversification for policy makers and investors since the results of portfolio management and hedging effectiveness ratio are different to previous studies. |
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