Islamic and conventional equity markets: Two sides of the same coin,or not?

tThis study undertakes an empirical analysis of both mean and variance dynamics between the MSCIACWI Islamic stock index on the one hand and three conventional counterparts for the US, developed,and GCC markets on the other. The investigation is carried out in the context of the modified cross-correlation function testing procedure of Hong (2001), after filtering out the effect of a diverse set of globalinfluences and risk factors and accounting for regime shifts in the conditional second moment dynamics.The empirical evidence reveals the presence of substantial mean and volatility spillovers radiating fromthe mainstream stock market indices to their Sharia-compliant counterpart, with the opposite directionbeing largely negated. The findings invalidate the dichotomous distinction between conventional andIslamic stock markets. Practical implications for investors and portfolio managers are drawn from theresults