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Geopolitical Risk and the Return Volatility of Islamic Stocks in Indonesia and Malaysia - A GARCH-MIDAS Approach

Author

Listed:
  • Umar B. Ndako
  • Afees A. Salisu
  • Muritala O. Ogunsiji

    (Centre for Econometric & Allied Research, University of Ibadan, Nigeria)

Abstract

In this paper, the predictive value of geopolitical risk (GPR) for the return volatility of Islamic stocks in Indonesia and Malaysia is examined. GPR data, whether global or country-specific, heighten the return volatility of Islamic stocks in both countries, albeit with a greater impact on Indonesia. Additional analyses show improved out-of-sample forecast gains with the inclusion of GPR data in the predictive model of the return volatility of Islamic stocks.

Suggested Citation

  • Umar B. Ndako & Afees A. Salisu & Muritala O. Ogunsiji, 2021. "Geopolitical Risk and the Return Volatility of Islamic Stocks in Indonesia and Malaysia - A GARCH-MIDAS Approach," Asian Economics Letters, Asia-Pacific Applied Economics Association, vol. 2(3), pages 1-5.
    • Handle: RePEc:ayb:jrnael:38
    DOI: 2021/10/06
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    References listed on IDEAS

    as
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    3. Mohammed Najatullah Siddiqi, 2009. "Current Financial Crisis and Islamic Economics الأزمة المالية الحالية والاقتصاد الإسلامي," Chapters of books published by the Islamic Economics Institute, KAAU or its faculty members., in: Islamic Economics Institute (ed.),Issues in the International Financial Crisis from an Islamic Perspective-05 قضايا في الأزمة المالية العالمية من منظور إسلامي - 5, edition 1, chapter 1, pages 1-9, King Abdulaziz University, Islamic Economics Institute..
    4. Elie Bouri & Riza Demirer & Rangan Gupta & Hardik A. Marfatia, 2019. "Geopolitical Risks and Movements in Islamic Bond and Equity Markets: A Note," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(3), pages 367-379, April.
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    Cited by:

    1. Zhang, Yaojie & He, Jiaxin & He, Mengxi & Li, Shaofang, 2023. "Geopolitical risk and stock market volatility: A global perspective," Finance Research Letters, Elsevier, vol. 53(C).
    2. Niu, Jing & Ma, Chao & Wang, Yunpeng & Chang, Chun-Ping & Wang, Haijie, 2022. "The pricing of China stock index options based on monetary policy uncertainty," Journal of Asian Economics, Elsevier, vol. 81(C).
    3. Salisu, Afees A. & Ogbonna, Ahamuefula E. & Lasisi, Lukman & Olaniran, Abeeb, 2022. "Geopolitical risk and stock market volatility in emerging markets: A GARCH – MIDAS approach," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    4. Salisu, Afees A. & Shaik, Muneer, 2022. "Islamic Stock indices and COVID-19 pandemic," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 282-293.

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    More about this item

    Keywords

    garch-midas; out-of-sample forecast; predictability; islamic stocks; geopolitical risk;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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