THE INTEGRATION OF ISLAMIC STOCK MARKETS: DOES A PROBLEM FOR INVESTORS?

Mohd Yahya Mohd Hussin; Yusni Anis Yusof; Fidlizan Muhammad; Azila  Abdul Razak; Emilda Hashim; Nur Fakhzan Marwan

doi:10.51200/ljms.v7i.3008

Authors

Mohd Yahya Mohd Hussin Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, Perak
Yusni Anis Yusof Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, Perak
Fidlizan Muhammad Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, Perak
Azila Abdul Razak Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, Perak
Emilda Hashim Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, Perak
Nur Fakhzan Marwan Faculty of Business Management, Universiti Teknologi MARA, Kedah

DOI:

https://doi.org/10.51200/ljms.v7i.3008

Keywords:

Islamic Stock Market, Investment Portfolios, Co-integration, Granger Causality, Variance Decomposition

Abstract

This paper empirically investigates co-integration between Islamic stock market in Malaysia, Indonesia and the world by applying the Vector Auto Regression (VAR) method. This research used monthly data from January 2007 to May 2012 taken from authorized sources. The finding shows that there is no long-run or equilibrium relationship exists between FTSE Bursa Malaysia Emas Shariah (FBMES), Jakarta Islamic Index (JAKISL), and Dow Jones Islamic Market index (DJIM). Based on the result, hence, it can be concluded that the Islamic stock markets of Malaysia does not integrate with Indonesia’s, as well as with the world markets in the long run. This will create rooms for investors to diversify their investment portfolios, which puts Malaysia as one of their favoured investment destinations. From the Granger causality view, the return of JAKISL and DJIM is driven by the return of FBMES in the short run.