Effect of US Macroeconomic Variables on the Volatility of Conventional and Islamic Indices

50th National Conference, Department of Economics, A.B.U Business School, Nigeria

25 Pages Posted: 5 Feb 2021

See all articles by Bello Abba Ahmed

Bello Abba Ahmed

Department of Economics and Development Studies, Federal University Dutse, Nigeria

Salamatu I. Isah

Department of Economics, Ahmadu Bello University, Zaria

Date Written: July 2, 2019

Abstract

The paper examined the effect of macroeconomic variables on the volatility of conventional and Islamic indices. The macroeconomic variables included economic uncertainty index, federal funds rate, money supply, volatility fear index, consumer price index, Treasury bill and Brent oil price and the stock indices were from DOW Jones and FTSE. This study employed the daily closing stock prices of 22 major global Islamic and conventional indices from eleven countries comprising, US, EU, Canada, Kuwait, Qatar, Malaysia, Japan, China, Turkey, India, and Taiwan. The obtained from the data base of Wall Street Journal and FRED database of St. Louis Federal Reserve. The study employed three standard unit root tests, the Augmented Dickey-Fuller (ADF), the Phillips-Peron (PP) and the KPSS test as well as Johansen Cointegration and VECM models. ARCH and GARCH models were also used for the estimations. The study found the presence of a long-run association between Islamic indices, broad market index, and the US macroeconomic variables. However, it was discovered that most of the US macroeconomic variables were not statistically significant in determining the conditional variances of the selected conventional and Islamic indices. The study recommends that investors in the selected countries should give emphasis to the macroeconomic environment of each respective country as it could have greater impact on the returns of the indices than the US macroeconomic variables.

Keywords: Stock indices, Stock volatility, Macroeconomic variables, Islamic indices, Cointegrtion

JEL Classification: C32, E44, G15

Suggested Citation

Abba Ahmed, Bello and I. Isah, Salamatu, Effect of US Macroeconomic Variables on the Volatility of Conventional and Islamic Indices (July 2, 2019). 50th National Conference, Department of Economics, A.B.U Business School, Nigeria, Available at SSRN: https://ssrn.com/abstract=3737403 or http://dx.doi.org/10.2139/ssrn.3737403

Bello Abba Ahmed (Contact Author)

Department of Economics and Development Studies, Federal University Dutse, Nigeria ( email )

Dutse, Jigawa 7156
Nigeria
+2348032327195 (Phone)

Salamatu I. Isah

Department of Economics, Ahmadu Bello University, Zaria ( email )

Zaria, WY +234
Nigeria
+2348065994599 (Phone)

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