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Is the islamic equity market independent of the influence of primary commodities ? Malaysian evidence

Author

Listed:
  • Lajis, Siti
  • Masih, Mansur

Abstract

This paper is an attempt to test the influence of commodities such as, the primary export commodities on the Islamic equity market. Malaysia is taken as a case study. The standard time series techniques are used for the analysis. The results tend to indicate that the Islamic equity market is exogenous, i.e., it is independent of the influence of commodities.. This finding appears to be a bit counter-intuitive in that the Islamic equity is expected to be closely linked with the real sector, represented by its endogeneity vis-à-vis the selected commodity variables. Based on this, the study confirms the perception that Islamic equity is a subset market of the conventional capital market. The empirical analysis tends to suggest that policy measures and structural reforms may be initiated in order to avoid financialization and decoupling of the Islamic equity market from the real sector, as in the case of conventional equity market.

Suggested Citation

  • Lajis, Siti & Masih, Mansur, 2018. "Is the islamic equity market independent of the influence of primary commodities ? Malaysian evidence," MPRA Paper 104766, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104766
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    File URL: https://mpra.ub.uni-muenchen.de/104766/1/MPRA_paper_104766.pdf
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    References listed on IDEAS

    as
    1. Barbara Rossi, 2012. "The Changing Relationship Between Commodity Prices and Equity Prices in Commodity Exporting Countries," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(4), pages 533-569, December.
    2. Barbara Rossi, 2012. "The changing relationship between commodity prices and equity prices in commodity exporting," Economics Working Papers 1405, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Islamic Equity; Commodities; VECM; VDC; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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