A fractional cointegration VAR analysis of Islamic stocks: A global perspective

Salisu, Afees A. and Ndako, Umar B. and Adediran, Idris A. and Swaray, Raymond,(2019), A fractional cointegration VAR analysis of Islamic stocks: A global perspective. , North American Journal of Economics and Finance, UNSPECIFIED

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In this study, we analyse the behaviour of Islamic stocks from a global perspective covering an array of regional Islamic stock markets. Both the fractional integration and fractional cointegration techniques are employed. Thus, we are able to establish whether Islamic stocks are individually integrated with a fractional order on the one hand and whether they are fractionally cointegrated on the other hand. We find that all the regional Islamic stock markets exhibit long memory but are mean reverting regardless of the choice of fractional integration technique and data sample. Second, using the fractional cointegration VAR (FCVAR) approach of Johansen and Nielsen (2012), we find that all the regional stock markets are cointegrated with a fractional order and this behaviour may be influenced by global economic conditions. Further analyses suggest that ignoring the fractional integration property of Islamic stocks when modelling their long run behaviour may lead to wrong conclusions. Also, the economic significance test conducted indicates that Islamic financial markets offer risk hedging characteristics and the results are robust to alternative data frequencies
Keywords : Islamic stocks Efficient Market Hypothesis Fractional integration FCVAR, UNSPECIFIED
Journal or Publication Title: North American Journal of Economics and Finance
Item Type: Article
Subjects: Ekonomi Islam
Depositing User: Nila Nurjanah
Date Deposited: 17 Dec 2019 04:18
Last Modified: 17 Dec 2019 04:18
URI: https://repofeb.undip.ac.id/id/eprint/304

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