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Dynamic Linkages between Newly Developed Islamic Equity Style Indices: Is Growth Style More Influential Than Value Style?

Author

Listed:
  • Shahrin Saaid Shaharuddin

    (Faculty of Business and Accountancy, University of Malaya, Malaysia.)

  • Wee-Yeap Lau

    (Faculty of Economics and Administration, University of Malaya, Malaysia.)

  • Tien-Ming Yip

    (Faculty of Economics and Administration, University of Malaya, Malaysia.)

Abstract

This study investigates the dynamic linkages between the newly developed Islamic equity style indices from stocks listed in FTSE EMAS Shariah Index from May 2006 to May 2017. Based on the Vector Autoregressive model (VAR), the results indicate: Firstly, there are short-run dynamics between Islamic equity style indices. Notably, growth style indices are more influential than value style; Secondly, the Large Growth index is the most influential, followed by Medium and Small Growth; Thirdly, Large Growth index precedes Large Value index. These results reaffirm that growth style is more receptive than value style with respect to new information due to institutional investors who prefer growth stocks from blue-chip companies, GLCs and GLICs. This study also proposes the effect of retail investors to explain information flow from small-cap to medium, and medium to largecap. Robustness check with Toda-Yamamoto procedure yields similar result with VAR model except for one short-run relationship from Large Growth to Large Value. Our results redefine the importance of growth style and support new product differentiation in the quest to develop the Islamic fund management industry.

Suggested Citation

  • Shahrin Saaid Shaharuddin & Wee-Yeap Lau & Tien-Ming Yip, 2017. "Dynamic Linkages between Newly Developed Islamic Equity Style Indices: Is Growth Style More Influential Than Value Style?," Capital Markets Review, Malaysian Finance Association, vol. 25(2), pages 49-64.
    • Handle: RePEc:mfa:journl:v:25:y:2017:i:2:p:49-64
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    References listed on IDEAS

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    Cited by:

    1. Jasman Tuyon & Zamri Ahmad, 2018. "Behavioural Asset Pricing Determinants in a Factor and Style Investing Framework," Capital Markets Review, Malaysian Finance Association, vol. 26(2), pages 32-52.

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    More about this item

    Keywords

    Islamic finance; equity style index; information transmission; growth style; fund management.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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