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Investors’ sentiment and US Islamic and conventional indexes nexus: A time–frequency analysis

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  • Aloui, Chaker
  • Hkiri, Besma
  • Lau, Chi Keung Marco
  • Yarovaya, Larisa

Abstract

This paper is the first attempt to investigate the co-movement between investors’ sentiment and the Islamic and conventional equity returns over diverse time-scales and frequencies in the US market. Using squared wavelet coherence methodology, we show that the time-varying nature of co-movement exists for both the Islamic and conventional indexes. Application of asymmetric causality test unveils that middle cap firms are susceptible from negative innovations in investors’ sentiment. We conclude that the Sharia rules have no influence on the connectedness between sentiment and Islamic equity returns.

Suggested Citation

  • Aloui, Chaker & Hkiri, Besma & Lau, Chi Keung Marco & Yarovaya, Larisa, 2016. "Investors’ sentiment and US Islamic and conventional indexes nexus: A time–frequency analysis," Finance Research Letters, Elsevier, vol. 19(C), pages 54-59.
    • Handle: RePEc:eee:finlet:v:19:y:2016:i:c:p:54-59
    DOI: 10.1016/j.frl.2016.06.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Investors’ sentiments; Islamic and conventional stock indexes; Wavelets; Asymmetric causality;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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