Portfolio Selection in Asia/Pacific Region - Islamic Markets

Journal of Islamic Accounting and Business Research, Vol. 11 No. 3. https://doi.org/10.1108/JIABR-02-2018-0022

30 Pages Posted: 10 Mar 2019 Last revised: 6 Nov 2023

See all articles by Muhammad Hanif

Muhammad Hanif

National University of Computer and Emerging Sciences (NUCES or FAST-NU) - FAST School of Business

Date Written: January 29, 2019

Abstract

Islamic Capital Markets-ICMs, featured as socially responsible investments, less levered, and more reflective of the real sector, is a recent development in financial markets, with impressive growth and offer the potential for portfolio diversification benefits. This study is conducted on the long run integration of ICMs in Asia/Pacific region. Our sample includes ICMs of Asia/Pacific region (Pakistan, India, China, Japan, Thailand, Malaysia, and Indonesia) for 280 weeks from 2011-2016. Selected indexes are FTSE Islamic except for Pakistan and Indonesia. Evidence obtained through the application of correlation, unit root, Johansen cointegration and Granger causality tests.

We document results of integration of ICMs based on developmental stage, geographic location, economic cooperation, and shared religious beliefs/civilization. We find partial support for all hypotheses: integration of markets based on economic grouping, location, economic treaties, and shared civilization. The Japanese market is the most integrated, while Indian and Malaysian markets are the least. Evidence supports the shift of leadership role from advanced markets to emerging markets.Selected diversification opportunities are available for global Islamic as well as conventional investors. We recommend closer cooperation among Muslim majority countries of the region, and effective use of economic cooperation treaties, for joint economic growth and prosperity. Our study contributes to the literature by providing evidence on the integration of Islamic capital markets in an economically important region (Asia/Pacific) that is witnessing an increasing role in global GDP and international trade.

Keywords: Islamic capital market, Cointegration, Granger causality, Asia-Pacific, Pakistan

Suggested Citation

Hanif, Muhammad, Portfolio Selection in Asia/Pacific Region - Islamic Markets (January 29, 2019). Journal of Islamic Accounting and Business Research, Vol. 11 No. 3. https://doi.org/10.1108/JIABR-02-2018-0022, Available at SSRN: https://ssrn.com/abstract=3324864

Muhammad Hanif (Contact Author)

National University of Computer and Emerging Sciences (NUCES or FAST-NU) - FAST School of Business ( email )

A.K. Brohi Road
Sector H/11-4
Islamabad, 44000
Pakistan
+92 (051) 111 128 128 (Phone)

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