A market efficiency comparison of Islamic and Non-Islamic Stock Indices  

Oleh:

Al- Khazali, Osamah M ; Guillaume, Leduc ; Alsayed, Mohammad Saleh

Jenis: Article from Proceeding
Dalam koleksi: SIBR-Thammasat 2014 Conference on Interdisciplinary Business & Economics Research June 5th- 7th, 2014 di Emerald Hotel Bangkok, page 1-32.
Topik: Islamic stock indices; efficient market; random walk hypothesis; martingale difference hypothesis
Fulltext: b14-160.pdf (292.79KB)

Isi artikel

This paper examines the martingale difference hypothesis (MDH) and the random walk hypothesis(RWH) for nine conventional and nine Islamic stock indices: Asia-Pacific, Canadian, Developed Country, Emerging, European, Global, Japanese, UK, and US. It investigates whether Islamic stock indices are more, less, or as efficient as their conventional counterparts. We test four sub-periods of bullish and bearish stock markets, together with the financial meltdown and its recovery, over the period 1997–2012. We use the Escanciano and Lobato’s (2009) automatic portmanteau test (AQ) and Deo’s (2000) test for the MDH. We also apply the automatic variance ratio test (AVR) developed by Choi (1999) and Kim (2009) for the RWH. Over the period from 1997 to 2012,we find that three conventional indices (Europe, Japan, and UK) are efficient,but that none of the Islamic indices are efficient in these markets. However, during the crisis period (2007–2012), both conventional and Islamic indices are efficient in these markets: Asia-Pacific, Canadian, European, and UK. Finally, during the other three sub-periods, conventional indices demonstrate more efficiency than their Islamic counterparts, with at least one conventional index showing more efficiency. We conclude that Islamic stock indices are less efficient in earlier sub-periods, but appear to become more efficientas their prevalence increases.

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