Hidden cointegration reveals hidden values in Islamic investments

Alexakis, C. and Pappas, Vasileios and Tsikouras, A. (2016) Hidden cointegration reveals hidden values in Islamic investments. Journal of International Financial Markets, Institutions and Money, 46 . pp. 70-83. ISSN 1042-4431. (doi:https://doi.org/10.1016/j.intfin.2016.08.006) (Full text available)

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http://dx.doi.org/10.1016/j.intfin.2016.08.006

Abstract

We explore long-run relationships between Islamic and conventional equity indices for the period 2000–2014. We adopt a hidden co-integration technique to decompose the series into positive and negative components; thus allowing the investigation of the indices during upward and downward markets. We find evidence of bi-directional dynamics during upward, downward and some mixed market movements. However, after adding control variables to our models, only the relationship for the negative components retains its significance; indicating that the Islamic index is the least responsive during bad times. This highlights the robust nature of Islamic investments and a possible differentiated investor reaction to financial information during market downtrends. Implications for practitioners are highlighted in a case study.

Item Type: Article
Uncontrolled keywords: Dow Jones; Hidden co-integration; Islamic equity index; Portfolio optimisation
Subjects: H Social Sciences
H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School
Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Vasileios Pappas
Date Deposited: 22 Feb 2018 09:43 UTC
Last Modified: 13 Aug 2018 14:42 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/66102 (The current URI for this page, for reference purposes)
Pappas, Vasileios: https://orcid.org/0000-0003-1885-4832
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