Islamic Stock Index Research Articles

Impact of Sharia‐Based Screening on Equity Risk: International Evidence

ABSTRACTThis paper investigates the impact of mainstream Sharia‐based screening methodologies on equity risk. The study is based on the daily returns of 23 pairs of stock indices belonging to different index providers, namely Dow Jones, FTSE, and S&P. For risk measurement, the study uses five Value at Risk (VaR) methods. Moreover, the conditional VaR (CVaR) is used to analyze the tail behavior of return distributions. The results show that Sharia‐based screening is a source of significant differences in risk. There is strong evidence that Islamic stock indices (ISIs) tend to be less risky than their conventional peers. Also, the screening process allows for keeping extreme negative returns at a lower level relative to unscreened indices. The analysis during the Dotcom and Subprime crises shows that, globally, the results are time‐invariant. In sum, Islamic screening is tantamount to prudential rules that lead to low‐risk portfolios; it is, in its essence, a risk‐reduction strategy. Findings suggest that Sharia‐compliant stocks would be of great attractiveness to risk‐averse investors. They will find their claim in this asset class, as its riskiness is relatively low. For banks, a lower VaR of Islamic investing implies fewer capital requirements for market risk when holding portfolios that include Sharia‐compliant stocks. Fewer capital requirements will enhance the banks' ability to invest and make profits, which will, in turn, result in reducing the cost of capital.

Safe Havens Characteristics of Islamic Stock Indices During Bearish and Bullish Markets: A Case of Developed and Developing Countries

Purpose — This study examines the performance of Islamic and conventional indices during bullish (positive) and bearish (negative) markets while the economic and financial conditions are different. Design/Methodology/Approach — This study uses GARCH (1,1) and wavelet-assisted cross-spectral, cross-correlation analyses to investigate the performance of Islamic and conventional stock indices and study the presence of safe havens, which reflect low volatility in the indices during times of market turbulence, for investors during bearish and bullish periods from 2019–2021. Findings — The paper finds that there is high and persistent volatility in Islamic indices in bullish markets, while in bearish periods the Islamic indices show low volatility persistence; and conventional indices were highly volatile during crisis periods. Also, the impact of news shocks on Islamic indices was intense before COVID-19, while after that news, shocks had a high impact on the conventional indices. The wavelet coherence analysis shows that there is high coherency between Islamic and conventional indices in developed countries but in developing countries, the opposite prevails. Originality/Value — The study is the first to use both Generalised Autoregressive Conditional Heteroskedasticity (GARCH) and wavelet coherence models for examining Islamic and conventional stock indices during bearish and bullish markets, especially in the COVID-19 pandemic era. Practical Implications — The results conclude that there are safe havens present in Islamic indices in both developing and developed countries, especially the United States (US), the United Kingdom (UK), India, and Indonesia, while in other countries the presence is weak. Both GARCH and wavelet coherence models show the same results regarding the presence of volatility and safe havens for investors in different countries.

Measuring risk transmission between international oil and islamic stock markets: A comparative analysis with the gold markets

An asymmetric dynamic conditional correlation-conditional value-at-risk (ADCC-CoVaR) method was used in examining the spillover of risk between gold, oil, and the Islamic stock indices between January 1, 2016, and July 6, 2023. The study evidenced increasing conditional correlations between these indices amidst the COVID-19 crisis. The findings indicate a generally significant transmission of downside and upside risks across all market pairs throughout the cumulative distributions and below (above) the 10th (90th) decile. Overall, the spillover of downside risk is considerably more heightened than that of upside risk, irrespective of the market pair and the direction of conditioning, with the exception of a few pairs, such as GOLD/DJI, DJIF/WTI, WTI/DJIF, WTI/DJIT and GOLD/DJII, where this pattern is not observed. In most cases, the risk spillover among the studied markets is not different based on their spillover direction. Amid the COVID-19 crisis, WTI offers improved diversification and advantages in terms of risk reduction with Islamic stock indices and vice versa. However, as compared to other Islamic indices, oil offers less diversification and risk reduction advantages within the Islamic financial sector, and vice versa. These findings hold significance for effective portfolio rebalancing and risk management practices.

DOES COVID-19 CAUSE STRUCTURAL CHANGES IN THE INDONESIAN STOCK MARKET BEHAVIOR? A COMPARISON OF ISLAMIC AND CONVENTIONAL STOCK

Introduction: Islamic stock is believed to be more stable and less risky than conventional stock due to specific screening based on Sharia principles, particularly during economic downturns. This research aims to investigate whether the Covid-19 outbreak caused a structural break in Indonesia's Islamic and conventional stock markets. Methods: This study covers the period from January 2007 to June 2022, divided into sub-periods before Covid-19 (January 2007 to February 2020) and during COVID-19 (March 2020 to June 2022). The study adopts the time series regression method to examine the predicting factors of Islamic and conventional stock indexes, followed by the application of the Chow Breakpoint Test method to determine whether there are structural changes in the Islamic and conventional stock markets due to Covid-19. Results: The results of this study suggest that, in comparison to the period preceding Covid-19, the Islamic stock index demonstrates heightened sensitivity to fluctuations in predicting factors during the pandemic. Additionally, there is an absence of any structural break observed in conventional indices. Consequently, Islamic stocks exhibit lower resistance during crisis periods than conventional stocks. Conclusion and suggestion: This finding prompts a comprehensive evaluation of the Sharia screening standards by policymakers to enhance the resilience of Islamic stocks during economic turmoil. Moreover, based on the results, it is suggested that investors cannot consider the Islamic stock index as a 'safe-haven' instrument during financial turmoil. The result of this research assist investors in adjusting their investment strategies more effectively, particularly in bearish market conditions.

Stock Market Resilience: Evaluating Islamic and Conventional Indices through COVID-19 Waves

The study examined the impact of the five COVID-19 waves on Pakistan's conventional (KSE-100) and Islamic (KMI-30) stock indices from March 3, 2020, to August 30, 2022. The DCC GARCH (1, 1) model found weak, predominantly negative connections between COVID-19 cases each day and stock returns. Visual data indicated a slight decrease in both indices as cases increased, reflecting previous findings on pandemics' adverse effects on stock markets. A thorough examination of the linkages between COVID-19 cases and financial indicators using Wavelet Coherence analysis highlighted intricate connections that are important to policymakers and financiers. Pakistan's KSE100 and KMI-30 indices showed a constant significant positive dynamic conditional association that persisted throughout the investigation. This challenges the perception that the Islamic index serves as a safe haven during financial crises. According to the research, Islamic stock markets, as reflected by the KMI-30, were not as protective or as good at hedging during crises like the COVID-19 pandemic. In fact, they were more susceptible to economic downturns. When navigating the effects of global health crises on financial markets, investors and policymakers must have a thorough understanding of these dynamics.

Islamic Stock Indices and COVID-19: Evidence from Indonesia

Islamic Stock Indices and COVID-19: Evidence from Indonesia

DETERMINASI INDEKS SAHAM SYARIAH

This study aims to determine the effect of international sharia stock indexes and macroeconomics on the price of the Jakarta Islamic Index. This study uses the Dow Jones Islamic Market World Index (DJIM), S&P 500 Shariah (SPSHX), and FTSE All-World Sharia Index (FTSES) as variables that represent international Islamic stock indices as well as interest rates (IR), inflation, and exchange rates. (ER) as a variable that represents Indonesia's macroeconomic conditions. Using the Vector Error Correction Model (VECM) method, this study shows that inflation, exchange rate, DJIM, SPSHX and FTSES have a significant influence on JII in the long term, whereas in the short term only inflation and interest rates have a significant effect on JII

COVID-19'UN İSLAMİ VE GELENEKSEL HİSSE SENEDİ ENDEKSLERİ ÜZERİNDEKİ ETKİSİ

The objectives of this research are to study Islamic stock indexes during the time of Covid-19 extensively and compare it with conventional stock indexes. Our research aims to analyse how stock returns indexes of Islamic and conventional have been affected by COVID-19. So, in other word, the research objected to analyse the effect of COVID-19 on the returns and volatility of Islamic and conventional stocks indexes by using ARIMA-X and EGARCH-X models. In keeping with this objective, the Islamic and conventional stocks indexes were used to estimate the financial stock return, and the dummy variable as of number of everyday cases of each country was used to estimate the effect of COVID-19.
 The research investigates the levels of uncertainty and volatility in Islamic and conventional stock indexes prior to and during the Covid-19 crisis. Additionally, it compares Islamic stock markets with others and analyses the impact of the pandemic on these markets. The findings reveal statistically significant results, with certain indexes demonstrating significance at levels of 10%, 5%, and 1%.
 By overall looking we can say that Nigerian indexes were affected the most among others which include the Islamic and the conventional, moreover the least affected by the uncertainty was in Indonesia and Malaysia and the Islamic indexes in general were better. We can conclude that Islamic stock indexes were affected like others by the COVID-19.

THE EFFECT OF MACROECONOMIC VARIABLES ON THE PRICE OF SHARIA HEALTH SECTOR SHARES LISTED ON THE JAKARTA ISLAMIC INDEX 70 (JII70) FOR THE PERIOD 2018-2022

This study examines the impact of macroeconomic factors on the performance of health sector sharia stocks listed on the Jakarta Islamic Index 70 (JII 70). The research adopts a quantitative approach, utilizing panel data regression to analyze the relationship between inflation, exchange rates, and the share prices of health sector issuers included in the JII 70. This research falls under the category of quantitative descriptive analytics. The population of this study consists of all health sector issuers listed on the JII 70 Islamic stock index. The sample includes health sector issuers registered on the JII 70 Islamic stock index from 2018 to 2022. The findings reveal that inflation has no significant impact on health sector Islamic stocks. Furthermore, the results indicate a negative correlation between exchange rates and stock prices, although this relationship is not statistically significant. Overall, the macroeconomic variables examined, namely inflation and exchange rates, do not exert a significant influence on the value of Islamic equities in the healthcare sector. Nevertheless, investors should still monitor these indicators as economic conditions can change unpredictably.

The Role Of Women Chief Executive Officers On Tax Avoidance Decisions In Islamic Stock Index

This study aims to show empirical data on the impact of women CEO traits on tax avoidance. The populations are all companies listed on the Indonesian Islamic Stock Index from 2021 to 2022, as many as 403 firms. The data collection technique used in this research was quota sampling, which obtained 350 observation data. The variables that were observed in this study were employed as the study's objectives, including the traits of women CEOs as independent variables, tax avoidance as a dependent variable, and profitability, leverage, and firm size as control factors. Multiple linear regressions are used in the analysis that was used to solve the first problem. The findings indicated that female leaders who serve as CEOs negatively influence tax avoidance. This research is expected to add to the literature and be helpful in the development of accounting disciplines, especially in corporate governance in disclosing tax avoidance by companies. The practical implications of this research provide helpful managerial implications for companies as corporate governance in managing strategies and policies related to corporate tax payments.

Panel Data Regression on Tax Avoidance: Reviewed from Islamic Corporate Social Responsibility and Financial Ratio Analysis

<p><em>Tax</em><em> avoidance becomes unique because it is allowed in the sense that it does not violate the law. However, it is undesirable in practice because it affects the country’s revenue. This study experimentally investigates the relationship between Islamic corporate social responsibility, profitability, leverage, inventory intensity, capital intensity</em><em>, </em><em>and tax avoidance. This research employs a causal methodology and is quantitative. Only businesses listed on the Indonesian Islamic Stock Index (ISSI) </em><em>were</em><em> included in this analysis. The purposive sampling approach was </em><em>employed</em><em> to gather a sample of 15 companies for the 2016–2021 research period. Profitability has a negative impact on tax avoidance, leverage has a negative impact on tax avoidance, inventory intensity has a positive and significant impact on tax avoidance, capital intensity has no discernible impact on </em><em>tax avoidance</em><em>, and Islamic corporate social responsibility has no discernible impact on </em><em>tax avoidance</em><em>.</em></p>

Risk Spillover of Russia-Ukraine War and Oil Price on Asian Islamic Stocks and Cryptocurrency: A Quantile Connectedness Approach

This paper makes an initial attempt to investigate the risk spillover of the Russia-Ukraine war and oil price on Asian Islamic Stocks and bitcoin. We apply quantile-based connectedness measures using daily return data covering four Asian Islamic stock indices–oil, gold, bitcoin, and war panic–from February 1, 2022, to July 15, 2022. The results indicate higher connectedness in the upper and lower quantiles compared to the middle quantile, which implies that return shocks react more sharply during high war panic.

Do I slamic S tocks Outperform C onv entional S tocks During C risis Periods? A Global Comparison

Purpose: This study examines the performance of Islamic and Conventional stock indices during the Covid-19 pandemic crises. The aim of the study is to find the existence of safe havens in Islamic stock indices.
 Design/methodology/approach: The study uses mean and cumulative return values and the GARCH (1 1) model to examine the volatility performance of stock returns and the impact of Covid-19 on both indices.
 Findings: Our findings indicate that Islamic stock indices tend to outperform conventional indices during crisis periods, particularly in developing economies and in the short term. However, conventional stock indices exhibit stronger performance in the long run and post-crisis periods. Moreover, the study reveals that the effects of Covid-19 cases and deaths on both indices vary across countries. Additionally, Islamic stock returns demonstrate lower volatility compared to previous shocks and returns, whereas conventional indices experience higher volatility, particularly in developing countries. Therefore, the s tudy establishes that I slamic indices can serve as safe havens for investors in certain countries, but not universally.
 Research limitations/implications: The study can be extended and more effective by adding more crisis events and a number of years to examine long-term stock moments. The study can be helpful for investors in designing investment portfolios, especially in times of crisis where the majority of investors try to find safe havens for investment.
 Originality/value: This study is the first to examine the impact of recent crises on Islamic and conventional stock indices in the world's big stock markets. The study is also the first one to use the longest data period among the recent studies to differentiate the performance of Islamic and conventional indices.

Assessing the potential of blockchain technology for Islamic crypto assets

Purpose The rapid rise of Islamic crypto assets, underpinned by blockchain technology, has introduced a novel dimension to the Islamic financial landscape, raising questions about their potential as safe havens within emerging Islamic economies. However, the opportunities and challenges associated with this phenomenon remain insufficiently explored. In this context, this study aims to empirically investigate the extent to which blockchain technology can establish Islamic crypto assets as safe havens in equity markets within Islamic economies. Design/methodology/approach This study addresses the need for rigorous empirical analysis to understand the dynamics between Islamic crypto assets and stock markets in emerging Islamic economies, focusing on the transmission of volatility. While the evolving nature of the Islamic financial sector demands reliable data, the reliance on the most available data offers insights into the expected future trends in this emerging field. The research specifically focuses on three essential assets in the Islamic financial portfolio: OneGram Coin and X8XToken, both backed by gold and MRHB DeFi, an Islamic DeFi asset lacking gold backing. These crypto assets are compared with corresponding assets in seven stock markets of emerging Islamic economies. Using daily log returns of the Islamic crypto assets from various sources and seven Islamic stock indices. The data covers the period from December 27, 2021, to December 28, 2022, capturing the fluctuations in Islamic stocks and cryptocurrency markets during the post-COVID-19 era. This research uses advanced econometric techniques, including pairwise dynamic correlation and the DCC GARCH model. Findings The findings indicate that Islamic crypto assets exhibit distinct characteristics, with lower volatility and low correlations compared to their conventional counterparts in non-Islamic contexts. This outcome suggests that these Islamic crypto assets could potentially serve as safe havens within Islamic stock markets, offering valuable insights for various stakeholders, including investors, governments and policymakers. Research limitations/implications The findings are based on a specific set of Islamic crypto assets and may vary with a different selection. Market dynamics can also influence the relationships observed. Nevertheless, the outcomes provide valuable insights for investors, policymakers and researchers interested in the intersection of Islamic finance, cryptocurrency and technology. Originality/value In essence, this research not only unveils the potential of Islamic crypto assets as stabilizing forces but also delineates a trajectory for subsequent research endeavours within the realm of emerging Islamic Fintech, elucidating the challenges, opportunities and benefits that lie therein. With a discerning eye on circumventing the pitfalls entrenched within conventional crypto finance, this study contributes to a heightened comprehension of the transformative role that Islamic crypto assets can assume, ultimately enriching the financial resilience of Islamic economies.

Pengaruh Rasio Keuangan dan Ukuran Perusahaan terhadap Return Saham Jakarta Islamic Index 70

Sharia-based investments are increasingly in demand by investors. An example of this phenomenon is the emergence of a new Islamic stock index, namely the Jakarta Islamic Index (JII) 70. One of the aims of investors is to expect a good rate of return on what they have invested. This study aims to analyze whether JII 70 stock returns can be influenced by financial ratios and company size variables with objects namely companies that have been listed on the index from 2018-2020. The population in this study was 101 companies through purposive sampling, 21 companies were used as samples. There are nine variables used in this study with the results showing that stock returns can be influenced by three variables, namely debt to equity ratio, price earning ratio, dividend per share. Meanwhile, stock returns cannot be influenced by six other independent variables including return on assets, earnings per share, economic value added, total asset turnover, net profit margin and company size.

Analysis of Exchange Rate, Inflation and BI Rate on Return of Syari'ah Share

This study aims to analyze the exchange rate, inflation and BI rate on stock returns, as well as know developments about the Jakarta Islamic index. Changes in market behaviour make people pay more attention to the company's financial performance factors and macroeconomic factors that affect stocks. The stock return is also influenced by the market index and macro factors, namely; inflation, interest rates, exchange rate, BI rate and economic growth. Investment in Islam is a recommended activity because by investing in assets that are owned it becomes productive and also brings benefits to other people. The Islamic capital market is an indicator of a country's economic growth, as an alternative for individuals to invest. This study used quantitative methods with secondary data sources. The population used in this study is all time series data (time series data) contained in the Jakarta Islamic Stock Index (JII). 11 companies met the criteria and were selected as the research sample. Data collection was carried out using literature and documentation. The data analysis technique used is descriptive statistical analysis. The results obtained from this study indicate that: 1) the exchange rate variable has a significant and significant effect on stock returns with a p-value (Sig) <0.05, namely 0.000 <0.05, then Ha is accepted and Ho is rejected. 2) The inflation variable has a significant and significant effect on people's income with a p-value (Sig) <0.05, namely 0.001 <0.05, then Ha is accepted and Ho is rejected. 3) The BI rate variable has a significant effect on people's income with a p-value (Sig) <0.05, namely 0.045 <0.05, so Ha is accepted and Ho is rejected. 4) Exchange Rate, Inflation and BI Rate variables have a significant and significant effect on people's income with a Fcount value of 6.250 > Ftable 3.172 (df = 55 – 2) with a probability value or sig. = 0.001 <0.05 means that Ha is accepted and Ho is rejected.

Relationship Between Bitcoin and Islamic Stock Indices During the COVID-19 Pandemic and the Russia-Ukraine Crisis

We analyze the relationship between Bitcoin and major regional Islamic stock indices during two major events: COVID-19 and the Russia-Ukraine war. The multi-horizon analysis provide evidence of low correlation between Bitcoin’s inter-temporal returns and Islamic indices returns during periods before extreme events. However, there is limited potential for diversification in the long run as their correlations increase significantly. During shocks, Bitcoin cannot be a safe haven for Islamic markets.

Sharia’s Accounting Information Disclosure, Accountability, and Auditor Independence Effects on Stakeholder Trust: Analysis on Sharia Companies in Capital Market

Businesses in the food and beverage sector have strong opportunities to grow in their operations because people consume more food and beverages. In order to calculate the level of future risk, data relating to financial proportions must be worked out in other financial investigation structures. Investigating the financial challenges faced by companies in the food and beverage sector that trade conventional and Islamic stocks on the Indonesia Stock Exchange is the aim of this study. The research examines the relationship between these factors and stakeholder trust in order to understand the impact of accounting practices and auditor independence on the trustworthiness of Sharia companies. The study utilizes quantitative and associative approach. By measuring linearly and clauses to describe the relationship between two or more variables, associative research techniques are a type of research that uses statistical calculations to test hypotheses. Audit delay is one of the things that tempts businesses to change auditors. This study supports the hypothesis that organizations that experience audit delays are more likely to change auditors in the next period in an effort to win back investor confidence. The test findings show that audit opinion, audit delay, and financial strain all impact auditor turnover at the same time. The research findings show that organizations that experience accounting losses do not experience financial difficulties directly. Usually, businesses whose shares are listed on the Islamic stock index have stronger financial strength.

The impact of Covid-19 and Russia–Ukraine war on the financial asset volatility: Evidence from equity, cryptocurrency and alternative assets

This study investigates the volatility and external shock persistence within the financial and alternative assets markets during times of crises triggered by Covid-19 and the war in Ukraine. Univariate GARCH family models are used to capture the effect of financial turmoil caused by recent crises. Five different class of assets (which includes Islamic, ESG, Conventional, Crypto, FinTech, and commodities) have been chosen to represent a sample of the worldwide traditional financial market and alternative assets. The findings of this study revealed that almost all financial and alternative assets experienced an increase in volatility, except Bitcoin, across all observation periods. Islamic stock and ESG indexes exhibited high volatility before the Covid-19 outbreak. During the pandemic, all assets became more volatile. In addition, Islamic equities and ESG indexes showed relatively lower risk compared to conventional stocks and other alternative assets during the war. Multiple financial assets tend to be highly volatile during crises; however, global investors need to consider the advantages of incorporating Islamic stocks and ESG indexes as part of their investment portfolio innovation strategy, particularly in the presence of geopolitical risk.

Co-Movement and Performance Comparison of Conventional and Islamic Stock Indices during the Pre- and Post-COVID-19 Pandemic Era

This study conducts a comparative analysis of the performance of Islamic and conventional indices in both developed and developing countries and territories, considering the pre- and post-COVID-19 pandemic periods. The research employs performance index tools and time–frequency wavelet-based analysis to assess how the COVID-19 pandemic affected the performance, volatility, and co-movement of Islamic and conventional stock indices. The findings reveal that Islamic stock indices are more resilient and tend to outperform conventional stocks during crisis periods in both developed and developing countries and territories, and this trend holds true in the long and short term across most countries. The analysis of wavelet coherence indicates a strong co-movement and coherence between Islamic and conventional indices. Furthermore, the study reveals that in developing countries and territories, the co-movement is characterized by weak coherence and high volatility compared to developed countries and territories. The study highlights the significance of Islamic indices as safe havens for investors during times of crisis, suggesting that including Islamic equities in investment portfolios can potentially yield higher returns compared to conventional indices. This research holds practical value for individual traders involved in the online trading of global stock indices, aiding them in constructing and designing internationally diversified portfolios. Unlike previous studies that focused on specific countries and territories and indices, this study offers a comprehensive examination of the behavior of Islamic and conventional indices across major global markets during both crisis and noncrisis periods. The results contribute significantly to the existing literature and offer valuable insights for investors.