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Global risk exposures and industry diversification with Shariah-compliant equity sectors
Journal article   Peer reviewed

Global risk exposures and industry diversification with Shariah-compliant equity sectors

Mehmet Balcilar, Riza Demirer and Shawkat Hammoudeh
Pacific-Basin finance journal, v 35(2), pp 499-520
01 Nov 2015
DOI: https://doi.org/10.1016/j.pacfin.2015.09.002
Featured in Collection :   UN Sustainable Development Goals @ Drexel

Abstract

Business & Economics Business, Finance Social Sciences
This paper examines the risk exposures of ten major Islamic sector indexes with respect to shocks in global conventional markets. Utilizing a dynamic three-regime, three-factor risk spillover model, we generally observe positive risk exposures of Islamic equity sectors with respect to developed market shocks. Consumer Services, Oil & Gas and Technology, however, are found to exhibit negative risk exposures during crash periods, implying possible safe haven benefits for global investors. Both in- and out-of-sample results suggest that the portfolios supplemented with positions in Islamic equity sectors yield much improved risk adjusted returns, implying significant international diversification benefits. Financials, Healthcare, Telecommunication, and Utilities particularly stand out with relatively higher weights allocated in the optimal portfolios, implying the significance of these Islamic sectors in global diversification strategies. (C) 2015 Elsevier B.V. All rights reserved.

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52 citations in Web of Science
52 citations in Scopus

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UN Sustainable Development Goals (SDGs)

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#8 Decent Work and Economic Growth

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Domestic collaboration
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Web of Science research areas
Business, Finance
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