Post-Crisis Interdependence Between Islamic Unit Trust Funds and Islamic Stock Market in Malaysia

Abstract

This chapter evaluates short- and long-term relationships between 34 Islamic unit trusts and the Islamic stock market after the global financial crisis. The study collects data from Bloomberg's database from 2009 until 2012 and employs J-J cointegration to identify the long-term relationship while Granger causality test is used to investigate how the changes in Islamic stock market can influence the changes in Islamic unit trusts in the short term. The finding indicates that 61.76 percent out of the 34 Islamic unit trusts tested do not have long-term equilibrium with the Islamic stock market. Furthermore, only a few Islamic trusts responded to the changes in the Islamic stock market. This study is important for at least two reasons: its role in filling the gap in the literature of unit trust—stock markets nexus in Islamic finance; and its findings provide relevant information that can benefit investors and fund managers.