Modelling Volatility in the Presence of Abrupt Jumps: Empirical Evidence from Islamic Stock Markets


Ng, Sew Lai and Chong, Lee Lee and Chin, Wen Cheong (2019) Modelling Volatility in the Presence of Abrupt Jumps: Empirical Evidence from Islamic Stock Markets. International Journal Electronics and Management, 13 (1). pp. 93-109. ISSN 1823-836X

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This study examines the abrupt jumps in the Dow Jones Islamic Market (DJIM) sectoral indices using a modified return-volatility model that allows for multiple structural breaks. The breakpoint tests for both return and volatility suggest that only several Islamic sectoral markets are insulated from the external shocks. The finding implies that the Islamic equities are merely a partial safe haven in the extreme market fluctuations. Among the sectoral indices, the oil and gas market exhibits the highest degree of volatility persistence, implying its past price can be useful to predict the future prices compared to other indices. It is also found the volatility persistence experiences a decline when abrupt jumps are incorporated into the model. These empirical results suggest the inclusion of abrupt jumps into the estimation is important to provide reliable explanatory power on the volatility dynamics of Islamic stock markets. This study may benefit the financial market participants and policymakers in making better-informed investing decision specifically for Sharia-compliant equities.

Item Type: Article
Uncontrolled Keywords: Islamic indices; sectoral stock markets; structural breaks; volatility
Subjects: H Social Sciences > HG Finance > HG1501-3550 Banking > HG1811-2351 Special classes of banks and financial institutions
Divisions: Faculty of Computing and Informatics (FCI)
Depositing User: Ms Suzilawati Abu Samah
Date Deposited: 25 Feb 2022 01:25
Last Modified: 25 Feb 2022 01:25


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