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Network Connectedness of World's Islamic Equity Markets

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  • Chowdhury, Md Iftekhar Hasan
  • Balli, Faruk
  • Hassan, M. Kabir

Abstract

We investigate connectedness across 52 Islamic equity markets using return spillovers. A network analysis shows that most European Islamic markets are deeply connected, whereas the Asian Islamic markets exhibit weak connectedness. Further investigations show that connectedness via negative returns is stronger than that via positive returns. The two types of connectedness also evolve differently over time in response to macroeconomic shocks. The global equity market volatility indicates positive coherence, but the real economic sector volatility indicates negative coherence. Finally, we find no significant impact of economic uncertainty, unlike in conventional markets. Understanding worldwide Islamic equity markets connectedness has the utmost importance for restricted Islamic investors to reduce the risk of over-exposed to the regional crisis.

Suggested Citation

  • Chowdhury, Md Iftekhar Hasan & Balli, Faruk & Hassan, M. Kabir, 2021. "Network Connectedness of World's Islamic Equity Markets," Finance Research Letters, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320316925
    DOI: 10.1016/j.frl.2020.101878
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    References listed on IDEAS

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    9. Balli, Faruk & de Bruin, Anne & Chowdhury, Md Iftekhar Hasan, 2019. "Spillovers and the determinants in Islamic equity markets," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
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    Cited by:

    1. Billah, Mabruk & Alam, Md Rafayet & Hoque, Mohammad Enamul, 2024. "Global uncertainty and the spillover of tail risk between green and Islamic markets: A time-frequency domain approach with portfolio implications," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1416-1433.
    2. Chowdhury, Md Iftekhar Hasan & Balli, Faruk & de Bruin, Anne, 2024. "Investment styles of islamic equity funds," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 172-187.

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    More about this item

    Keywords

    Islamic equity markets; Return spillovers; Network analysis; Wavelet coherence;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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