TRANSMISSION OF CONTEMPORANEOUS SHOCKS FROM THE WORLD TO EMERGING ISLAMIC EQUITY MARKETS: AN APPLICATION OF GEWEKE MEASURE
Keywords:
Instantaneous Feedbac, , Contemporaneous Spillover Effect, , Volatility Spillover, GewekeAbstract
The aim of this study is to examine the transmission of contemporaneous spillover effects from the world Islamic equity market to emerging Islamic equity markets. Geweke (1982) measure as an extension of Granger causality test (1969) has been used using daily index data from 1st September 2010 to 30th September 2017. The results confirm transmission of contemporaneous spillover effects from MSCI World Islamic Equity Market to all the selected ten Emerging Islamic Equity Markets during the period of study.
References
Aizenman, Joshua, A., & Ilan, N. (2006). FDI and trade--Two-way linkages?,The Quarterly Review of Economics and Finance, 46(3), 317-337.
Ajmi, A. N., Hammoudeh, S., Nguyen, D. K., & Sarafrazi, S. (2014). How strong are the causal relationships between Islamic stock markets and conventional financial systems? Evidence from linear and nonlinear tests. Journal of International Financial Markets, Institutions and Money, 28(C), 213-227.
Akaike, H. (1974). A new look at the statistical model identification. IEEE Transactions on Automatic Control, 19(6), 716-723.
Al-Deehani, T. M., & Moosa, I. (2006). Volatility spillover in Regional emerging stock markets: A structural time-series approach. Emerging Markets Finance and Trade, 42(4), 78-89.
Ali, A., Alim, W., Ahmed, J., & Nisar, S. (2021). Yoke of corporate governance and firm performance: A study of listed firms in Pakistan.
Alim, W., & Ali, A. (2021). The Impact of Islamic Portfolio on Risk and Return. Archives of Business Research, 9(11), 108-122.
Alim, W., Ali, A., & Metla, M. R. The Effect of Liquidity Risk Management on Financial Performance of Commercial Banks in Pakistan. Journal of Applied Economics and Business, 9(4), 109-128.
Al-Khazali, S., Lean, H. H., & Samet, A. (2014). Do Islamic stock indexes outperform conventional stock indexes? A stochastic dominance approach. Pacific-Basin Finance Journal 28, 29-46.
Audi, M., Sadiq, A., & Ali, A. (2021). Performance Evaluation of Islamic and Non-Islamic Equity and Bonds Indices: Evidence from selected Emerging and Developed Countries. Journal of Applied Economic Sciences, 16(73), 251– 269.
Barunik, J., & Krehlik, T. (2018). Measuring the frequency dynamics of financial connectedness and systemic risk. Journal of Financial Econometrics, 16(2), 271–296.
Calderon, C., & Liu, L. (2003). The direction of causality between financial development and economic growth. Journal of Development Economics, 72, 321–334.
Calvo, G. A. (1999). Contagion in Emerging Markets: When Wall Street is a Carrier. University of Maryland Working Paper.
Chong, A., & Calderon, C. (2000). Causality and feedback between institutional measures and economic growth. Economics and Politics, 12(1), 69–81.
Christofi, A., & Pericile, A. (1999). Correlation in Price Changes and Volatility of Major Latin American Stock Markets. Journal of Multinational Financial Management, 9, 79-93.
Chuang, I. Y., Lu, J. R., & Tswei, K. (2007). Interdependence of International Equity Variances: Evidence from East Asian Markets. Emerging Markets Review, 8, 311-327
Chuliá, H., Guillén, M., & Uribe, J., M. (2017). Spillovers from the United States to Latin American and G7 stock markets: A VAR quantile analysis. Emerging Markets Review, 31, 32-46.
Dania, A., &Malhotra, D. K. (2013). An empirical examination of the dynamic linkages of faith based socially responsible investing. Journal of Wealth Management,16, 65-79.
Dicle, M. F., &Levendis, J. (2013). Estimating Geweke’s (1982) measure of instantaneous feedback. Journal of the American Statistical Association, 13(1), 304-313.
Diebold, F., & Yilmaz, K. (2012). Better to give than receive: Predictive directional measurement of volatility spillovers. International Journal of Forecasting, 28(1), 57-66.
Duncan, A., & Kabundi, A. (2013). Domestic and foreign sources of volatility spillover to South African asset classes. Economic Modeling, 31, 566–573.
Engle, R. F. (1986). ARCH Models. In Tim Bollerslev, Robert Engle and Daniel B. Nelson (eds.), Handbook of Econometrics, vol 4, Elsevier.
Engle, R. F., & Susmel, R. (1993). Common Volatility in International Equity Markets. Journal of Business and Economics Statistics, 11,167-176.
Eun, C. S. & Shim, S. (1989). International Transmission of Stock Market Movements. Journal of Financial and Quantitative Analysis, 24, 241-256.
Finta, M. A., Frijns, B., & Tourani-Rad, A. (2017). Contemporaneous spillover effects between US and the UK equity markets. The Financial Review, 52(1), 145-166.
Gebka, B., & Serwa, D. (2007). Intra- and inter-regional spillovers between emerging capital markets around the world. Research in International Business and Finance, 21(2), 203–221.
Geweke, J. (1982). Measurement of Linear Dependence and Feedback between Multiple Time Series. Journal of the American Statistical Association, 77(378), 304-313, DOI: 10.1080/01621459.1982.10477803
Giap, T. K., Gopalan, S., & Ye, Y. (2016). Drivers of growth in travel and tourism industry in Malaysia: A Geweke causality analysis. Economies, 4(1), 1-15.
Golosnoy, V., Gribisch, B., & Liesenfeld, R. (2015). Intra-daily Volatility spillovers in International Stock Markets. Journal of International Money and Finance, 53, 95-114.
Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross- spectral methods. Econometrica, 37(3), 424–438.
Ho, C. S. F., Abd Rahman, N. A., Yusuf, N. H. M., &Zamzamin, Z. (2014). Performance of global Islamic versus conventional share indices, Pacific-Basin Finance Journal, 28, 110-121.
Ito, T., Engle, R. F., & Lin, W. L. (1990). Meteor showers or heat waves? Heteroscedastic intra daily volatility in the foreign exchange market. Econometrica, 58(3), 525–542.
Jawadi, F., Jawadi, N., & Louhichi, W. (2014). Conventional and Islamic stock price performance: An empirical investigation. International Economics, 137, 73-87.
Karim, B. A., Lee, W. S., Karim, Z. A., &Jais, M. (2012). The impact of subprime mortgage crisis on Islamic banking and Islamic stock market. Procedia – Social and Behavioral Sciences, 65(3), 668-673.
Khan, S. N., & Khan, W. A. (2018). Co-integration between Islamic and conventional stock market index: An investigation of diversification (A case of Asia Pacific region). Pakistan Business Review, 20(2), 341-353.
King, M., & Wadhwani, S. (1990). Transmission of volatility between stock markets. Review of Financial Studies, 3(1), 5–33.
Majdoub, J., & Sassi, S. (2017). Volatility spillover and hedging effectiveness among China and emerging Asian Islamic equity indexes. Emerging Markets Review, 31, 16-31.
Majdoub, J., & Mansour, W. (2014). Islamic equity market integration and volatility spillover between emerging and US stock markets. The North American Journal of Economics and Finance, 29(C), 452-470.
Martinez, C., & Ramirez, M. (2011). Dynamic conditional correlation in Latin American asset markets University of Rosario WP#107.
Miykoshi, T. (2003). Spillovers to Stock Return Volatility to Asian Equity Markets from Japan and the US. Journal of International Financial Markets, Institutions and Money, 13, 383-399.
Morgan Stanley Capital International. (2017). MSCI Islamic Index Series Methodology, New York.
Nagayev, R., Disli, M., Inghelbrecht, K., & Ng, A. (2016). On the dynamic links between commodities and Islamic equity. Energy Economics, 58, 125-140.
Ng, A. (2000). Volatility spillover effects from Japan and the US to the Pacific Basin. Journal of International Money and Finance, 19(2), 207–233.
Pesaran, M. H., & Shin, Y. (1998). Generalized Impulse Response Analysis in Linear Multivariate Models. Economics Letters, 58 (1), 17-29.
Ramchand, J., & Susmel, R. (1998). Volatility and Cross Correlation Across Major Stock Markets. Journal of Empirical Finance, 5, 397-416
Rejeb, A. B., & Arfaoui, M. (2019). Do Islamic stock indexes outperform conventional stock indexes? A state space modeling approach. European Journal of Management and Business Economics, https://doi.org/10.1108/EJMBE-08-2018-0088
Rigobon, R. (2003). Identification through heteroskedasticity. The Review of Economics and Statistics, 85(4), 777-792.
Shahzad, S. J. H., Ferrer, R., Ballester, L., & Umar, Z. (2017). Risk transmission between Islamic and conventional stock markets: A return and volatility spillover analysis, International Review of Financial Analysis, 52(C), 9-26.
Shahzad, S. J. H., Mensi, W., Hammoudeh, S., Rehman, M. U., & Al-Yahyaee, K. H. (2017). Extreme dependence and risk spillovers between oil and Islamic stock markets. Emerging Markets Review. DOI: 10.1016/j.ememar.2017.10.003
Solvang, H. K., & Subbey, S. (2019). An improved methodology for quantifying causality in complex ecological systems. PLoSONE, Available Online: https://doi.org/10.1371/journal.pone.0208078
Sulehri, F. A., & Ali, A. (2020). Impact of Political Uncertainty on Pakistan Stock Exchange: An Event Study Approach. Journal of Advanced Studies in Finance, 11(2), 194-207.
Susmel R., & Engle R. F. (1994). Hourly volatility spillovers between international equity markets. Journal of International Money and Finance, 13(1), 3–25.
Talla A. D., & Imad, A. M., (2014) Volatility Spillover in Regional Emerging Stock Markets: A Structural Time-Series Approach. Emerging Markets Finance and Trade, 42(4), 78-89.
Tan, K. G., Nguyen, L. P. A., Ye, Y. D. (2015). Development Growth Models for Singapore and Malaysia: A Geweke Causality Analysis. Journal of Centrum Cathedra: The Business and Economics Research Journal, 8(2),165-186.
Worthington, A., & Higgs, H. (2004). Transmission of Equity Returns and Volatility in Asian Developed and Emerging Markets: A Multivariate GARCH Analysis. International Journal of Finance and Economics, 9(1), 71-80.
Yu, J. S., & Hassan, M. K. (2008). Global and Regional Integration of the Middle East and North African (MENA) Stock Markets. The Quarterly Review of Economics and Finance, 48, 482-504
Zheng, T., & Huo, H. (2013). Reexamining the time-varying volatility spillover effects: A Markov switching causality approach. North American Journal of Economics and Finance, 26, 643–662.
