Hidden cointegration reveals hidden values in Islamic investments - Rennes School of Business Access content directly
Journal Articles Journal of International Financial Markets, Institutions and Money Year : 2017

Hidden cointegration reveals hidden values in Islamic investments

Vasileios Pappas
  • Function : Author
Alexandros Tsikouras
  • Function : Author

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.

Dates and versions

hal-02006352 , version 1 (04-02-2019)

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Christos Alexakis, Vasileios Pappas, Alexandros Tsikouras. Hidden cointegration reveals hidden values in Islamic investments. Journal of International Financial Markets, Institutions and Money, 2017, 46, pp.70-83. ⟨10.1016/j.intfin.2016.08.006⟩. ⟨hal-02006352⟩
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