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On the dependency structure of Islamic assets

In: Handbook of Empirical Research on Islam and Economic Life

Author

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  • Mahmoud Bekri
  • M. Kabir Hassan
  • Nafis Alam

Abstract

One of the challenges in Islamic finance (IF) is to employ appropriate modelling tools in asset allocation and risk management, which match the specificities of Islamic law Shariah-compliant stocks, especially after the wide rejection of the normality assumption. The employment of the copula-Garch and copula vines allows a more consistent modelling of the dependence structure. According to the safety-first rule of investing (hifdh almal shariah rule), the IF portfolio manager (mudharib) should consider the use of advanced models if they show considerable advantages. This chapter examines the dependence structure of six representative shariah-compliant stocks from the Islamic world and shows how the employment of the suggested copulas achieves a great amelioration of the modelling of the dependence structure in IF industry.

Suggested Citation

  • Mahmoud Bekri & M. Kabir Hassan & Nafis Alam, 2017. "On the dependency structure of Islamic assets," Chapters, in: M. Kabir Hassan (ed.), Handbook of Empirical Research on Islam and Economic Life, chapter 26, pages 602-623, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:16049_26
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    Keywords

    Asian Studies; Economics and Finance;

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