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Assessing the Impact of Crude Oil Price and Investor Sentiment on Islamic Indices: Subprime Crisis

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  • Achraf Ghorbel
  • Mouna Abdelhedi
  • Younes Boujelbene

Abstract

This article attempts to shed light on the impact of oil prices, investor sentiment, and conventional index on 11 Islamic indices, particularly during the subprime financial crisis and the oil crisis. Empirical evidence suggests that the Malaysian and Indonesian Islamic indices are very much affected by the oil volatility. Estimation results of the BEKK-GARCH model reveal that the pessimistic sentiment during the subprime crisis is transmitted to Islamic indices, suggesting the herding contagion. The authors' finding indicates that investors can use VIX investor sentiment as an indicator to predict Islamic returns volatility. In addition, the authors find that the oil shock has spilled into Islamic indices. The time-varying correlation indicates strong evidence of the contagion effect of crude oil and investor sentiment measure to Islamic indices during the oil shock and U.S. financial crisis period of 2008--2009.

Suggested Citation

  • Achraf Ghorbel & Mouna Abdelhedi & Younes Boujelbene, 2014. "Assessing the Impact of Crude Oil Price and Investor Sentiment on Islamic Indices: Subprime Crisis," Journal of African Business, Taylor & Francis Journals, vol. 15(1), pages 13-24, April.
    • Handle: RePEc:taf:wjabxx:v:15:y:2014:i:1:p:13-24
    DOI: 10.1080/15228916.2014.881222
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    References listed on IDEAS

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    1. Amélie Charles & Olivier Darné & Adrian Pop, 2012. "Are Islamic Indexes more Volatile than Conventional Indexes? Evidence from Dow Jones Indexes," Working Papers hal-00678895, HAL.
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    Cited by:

    1. Shahzad, Syed Jawad Hussain & Mensi, Walid & Hammoudeh, Shawkat & Rehman, Mobeen Ur & Al-Yahyaee, Khamis H., 2018. "Extreme dependence and risk spillovers between oil and Islamic stock markets," Emerging Markets Review, Elsevier, vol. 34(C), pages 42-63.
    2. Dash, Saumya Ranjan & Maitra, Debasish, 2018. "Does Shariah index hedge against sentiment risk? Evidence from Indian stock market using time–frequency domain approach," Journal of Behavioral and Experimental Finance, Elsevier, vol. 19(C), pages 20-35.
    3. Tarek Chebbi & Abdelkader Derbali, 2015. "The dynamic correlation between energy commodities and Islamic stock market: analysis and forecasting," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 8(2), pages 112-126.
    4. Yousra Trichilli & Mouna Abdelhédi & Mouna Boujelbène Abbes, 2020. "The thermal optimal path model: Does Google search queries help to predict dynamic relationship between investor’s sentiment and indexes returns?," Journal of Asset Management, Palgrave Macmillan, vol. 21(3), pages 261-279, May.
    5. Ha, Le Thanh & Bouteska, Ahmed & Sharif, Taimur & Abedin, Mohammad Zoynul, 2024. "Dynamic interlinkages between carbon risk and volatility of green and renewable energy: A TVP-VAR analysis," Research in International Business and Finance, Elsevier, vol. 69(C).
    6. Nicholas Addai Boamah, 2016. "Testing the expectations hypothesis of the term structure of interest rate: the case of Ghana," Journal of African Business, Taylor & Francis Journals, vol. 17(1), pages 1-15, January.
    7. Bahloul, Slah & Khemakhem, Imen, 2021. "Dynamic return and volatility connectedness between commodities and Islamic stock market indices," Resources Policy, Elsevier, vol. 71(C).
    8. Abokyi, Emmanuel & Asiedu, Kofi Fred, 2021. "Agricultural policy and commodity price stabilisation in Ghana: The role of buffer stockholding operations," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 16(4), December.
    9. Zaighum, Isma & Aman, Ameenullah & Sharif, Arshian & Suleman, Muhammad Tahir, 2021. "Do energy prices interact with global Islamic stocks? Fresh insights from quantile ARDL approach," Resources Policy, Elsevier, vol. 72(C).
    10. Chang, Bisharat Hussain & Sharif, Arshian & Aman, Ameenullah & Suki, Norazah Mohd & Salman, Asma & Khan, Syed Abdul Rehman, 2020. "The asymmetric effects of oil price on sectoral Islamic stocks: New evidence from quantile-on-quantile regression approach," Resources Policy, Elsevier, vol. 65(C).

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