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Do Islamic Stock Returns Hedge Against Inflation? A Wavelet Approach

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  • Norazza M. Haniff
  • Abul Mansur M. Masih

Abstract

This article makes an initial attempt to study the hedging effectiveness of Islamic stock returns against inflation for different investment horizons. We applied the wavelet analysis to measure the cross-correlations between the time series as a function of time-scales using data ranging from 2007 to early 2015. The main results tend to indicate the following: First, that for investment horizons not exceeding 3 years, the FTSE Bursa Malaysia Emas Shariah Index constituent returns may potentially hedge against inflation. Additionally, the hedging ability of stock returns was absent from 2008 to 2009 following the global financial crisis. Finally, a buy-and-hold strategy exceeding 3 years may erode investments. The results are plausible and have strong policy implications.

Suggested Citation

  • Norazza M. Haniff & Abul Mansur M. Masih, 2018. "Do Islamic Stock Returns Hedge Against Inflation? A Wavelet Approach," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(10), pages 2348-2366, August.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:10:p:2348-2366
    DOI: 10.1080/1540496X.2017.1363035
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    Cited by:

    1. Khan, Khalid & Su, Chi-Wei & Zhu, Meng Nan, 2022. "Examining the behaviour of energy prices to COVID-19 uncertainty: A quantile on quantile approach," Energy, Elsevier, vol. 239(PE).
    2. Su, Chi-Wei & Khan, Khalid & Umar, Muhammad & Chang, Tsangyao, 2022. "Renewable energy in prism of technological innovation and economic uncertainty," Renewable Energy, Elsevier, vol. 189(C), pages 467-478.
    3. Khurshid, Adnan & Khan, Khalid & Rauf, Abdur & Cifuentes-Faura, Javier, 2024. "Effect of geopolitical risk on resources prices in the global and Russian-Ukrainian context: A novel Bayesian structural model," Resources Policy, Elsevier, vol. 88(C).
    4. Bošnjak Mile & Novak Ivan & Bašić Maja, 2021. "Capital Market Returns and Inflation Nexus in Croatia: Wavelet Coherence Analysis," Business Systems Research, Sciendo, vol. 12(2), pages 253-267, December.
    5. Khan, Khalid & Su, Chi Wei & Khurshid, Adnan & Qin, Meng, 2023. "Does energy security improve renewable energy? A geopolitical perspective," Energy, Elsevier, vol. 282(C).
    6. Ahmed, Walid M.A., 2020. "Corruption and equity market performance: International comparative evidence," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    7. Selmi, Refk & Wohar, Mark & Deisting, Florent & Kasmaoui, Kamal, 2023. "Dynamic inflation hedging performance and downside risk: A comparison between Islamic and conventional stock indices," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 56-67.

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