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Testing for multifractality of Islamic stock markets

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  • Saâdaoui, Foued

Abstract

Studying the power-law scaling of financial time series is a promising area of econophysics, which has often contributed to the understanding of the intricate features of the global markets. In this article, we examine the multifractality of some financial processes and the underlying formation mechanisms in the context of Islamic equity markets. The well-known Multifractal Detrended Fluctuation Analysis (MF-DFA) is used to investigate the self-similar properties of two Dow Jones Islamic Market Indexes (DJIM). The results prove that both indexes exhibit multifractal properties. By discussing the sources of multifractality, we find that they are related to the occurrence of extreme events, long-range dependency of autocorrelations and fat-tailed distribution of returns. These results have several important implications for analysts and decision makers in modeling the dynamics of Islamic markets, thus recommending efficient asset allocation plans to investors dealing with Islamic equity markets.

Suggested Citation

  • Saâdaoui, Foued, 2018. "Testing for multifractality of Islamic stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 496(C), pages 263-273.
    • Handle: RePEc:eee:phsmap:v:496:y:2018:i:c:p:263-273
    DOI: 10.1016/j.physa.2017.12.118
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    Cited by:

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    2. Samuel T. Ogunjo, 2023. "The impact of the 2007–2008 global financial crisis on the multifractality of the Nigerian Stock Exchange," SN Business & Economics, Springer, vol. 3(1), pages 1-17, January.
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    4. Saâdaoui, Foued, 2023. "Skewed multifractal scaling of stock markets during the COVID-19 pandemic," Chaos, Solitons & Fractals, Elsevier, vol. 170(C).
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    6. Choi, Sun-Yong, 2021. "Analysis of stock market efficiency during crisis periods in the US stock market: Differences between the global financial crisis and COVID-19 pandemic," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    7. Abdullah, Mohammad & Chowdhury, Mohammad Ashraful Ferdous & Sulong, Zunaidah, 2023. "Asymmetric efficiency and connectedness among green stocks, halal tourism stocks, cryptocurrencies, and commodities: Portfolio hedging implications," Resources Policy, Elsevier, vol. 81(C).

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