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Is there any causal link between shariah index and islamic unit trust growth ? Malaysian evidence

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Listed:
  • Farid, Hazim
  • Masih, Mansur

Abstract

Islamic-based unit trust fund has been growing exponentially since 2007 and is believed as the main agent of stabilizer for FTSE Bursa Malaysia EMAS Shariah Index since then. This paper investigates the relationship between Islamic unit trust’s net asset value (NAV) growth as the focus variable and FTSE Bursa Malaysia EMAS Shariah Index (FTFBMS )along with other control variables such as, Brent oil, USD/MYR exchange and inflation rate. Revealing the relationship will give us the right steps to build a stable Shariah index. We employed the Auto Regressive Distributed Lags (ARDL) or ‘Bounds Test’ to find cointegration, and Variance Decomposition (VDC) to discover exogeneity and endogeneity among the variables. Malaysia is used as a case study. The Variance Decomposition shows that inflation leads changes followed by USD/MYR exchange rate with Islamic unit trust being the most endogenous or lagging. There are significant relationships between the variables in the long run with a strong causal link between FTSE Bursa Malaysia EMAS Shariah Index and Islamic unit trust funds growth where the latter is affected mostly by the former. The results have strong policy implications.

Suggested Citation

  • Farid, Hazim & Masih, Mansur, 2018. "Is there any causal link between shariah index and islamic unit trust growth ? Malaysian evidence," MPRA Paper 106226, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:106226
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    References listed on IDEAS

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    More about this item

    Keywords

    EMAS Shariah index; Unit trust; ARDL; 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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