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Islamic, socially responsible, and conventional market comovements: Evidence from stock indices
Author(s) -
Paltrinieri Andrea,
Floreani Josanco,
Kappen Jeffrey A.,
Mitchell Matthew C.,
Chawla Kavilash
Publication year - 2018
Publication title -
thunderbird international business review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.553
H-Index - 37
eISSN - 1520-6874
pISSN - 1096-4762
DOI - 10.1002/tie.22027
Subject(s) - cointegration , economics , volatility (finance) , equity (law) , stock (firearms) , financial economics , econometrics , stock market , stock market index , diversification (marketing strategy) , portfolio , islam , monetary economics , business , mechanical engineering , paleontology , philosophy , theology , horse , marketing , political science , law , biology , engineering
This article extends the literature on ethical investment risks, correlations, and comovements. Through a sample of 17 Islamic, socially responsible investment (SRI), and conventional stock indices, we investigate cointegration and dynamic correlations for the period 2005–2015. We also examine these stock indices’ responses to two major economic factors, namely, oil prices and market volatility. Our results show cointegration between Islamic, SRI and conventional stock indices, and comovements with mutual causalities. During crises, dynamic correlations tend to spike; however, quite a different pattern emerges during postcrisis periods when there is more variability in conditional covariances. Finally, we provide evidence that all three types of stock indices react positively to oil price changes, but negatively to global equity market volatility, albeit with different magnitudes. Overall, investors can obtain portfolio diversification benefits through SRI and Islamic stock indices, particularly in postcrisis periods.