Islamic Stock Markets and Geopolitical Risk

25 Pages Posted: 20 Nov 2019

Date Written: November 9, 2019

Abstract

The geopolitical risk found to be a relevant factor for investors to choose Islamic stock investment. This study focuses on the short-run and long-run asymmetric significance of geopolitical risk on Islamic stock market returns. Nonlinear Autoregressive Distributive Lag (NARDL) model has been used for the major Islamic countries i.e. Saudi Arabia, Malaysia, Turkey, and Indonesia. The short-run dynamics suggest the presence of short-run asymmetry in the case of Saudi Arabia and Indonesia. However, in the long-run, the positive and negative shock of geopolitical risk is having an asymmetric impact on the Islamic stock market return in the case of Indonesia. The Islamic stock market getting an asymmetric response to geopolitical shock can be because of multiple determinants related to the Islamic stock market and different environments of the Islamic stock market in each economy. The study recommends the Islamic investors and other participants to consider the asymmetric nature of Islamic stock market returns to minimize risk related to negative geopolitical events.

Keywords: Geopolitical risk, Islamic stock market, Islamic countries, NARDL

JEL Classification: G10, G11, G156, G18

Suggested Citation

Oad Rajput, Suresh Kumar and Siyal, Tariq and Bajaj, Namarta, Islamic Stock Markets and Geopolitical Risk (November 9, 2019). Available at SSRN: https://ssrn.com/abstract=3484057 or http://dx.doi.org/10.2139/ssrn.3484057

Suresh Kumar Oad Rajput (Contact Author)

Sukkur IBA University ( email )

SUKKUR IBA UNIVERSITY
SUKKUR, SINDH 65200
Pakistan
00923363322855 (Phone)
65200 (Fax)

Tariq Siyal

Sukkur IBA University ( email )

Sukkur Iba University
Sukkur, Sindh 56200
Pakistan

Namarta Bajaj

Sukkur IBA University ( email )

Sukkur Iba University
Sukkur, Sindh 56200
Pakistan

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