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Subject: search.filters.subject.Capital market (Islamic law)

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    Essays on determinants of integration of Islamic and conventional financial markets : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Auckland, New Zealand
    (Massey University, 2020) Billah, Syed Mabruk
    This dissertation contains a series of essays, three in total, which examine the determinants of integration of Islamic and conventional financial markets. Academic and commercial interest in Islamic finance has increased in recent years, meaning that it is commonly seen as a reasonable alternative to mainstream finance. However, it is notable that growing awareness of Islamic finance has emerged alongside several relevant concerns surrounding the poor performance of Shariah-compliant indices. The limitations include minimal access to risk management tools, low regulatory standards in Islamic finance, and a suboptimal governance framework. With the large expansion of Islamic finance in recent years, Sukuk (Islamic bonds), which are the Shariah-compliant substitute to conventional bonds, are becoming more prominent. Although numerous studies have examined the impact of global shocks on conventional bond spreads, little attention has been paid to explore the effect of global shocks on the Sukuk spreads. Therefore, the first study's objective was to examine the impact of factors affecting the conventional bond and Sukuk markets, including financial factors, economic policy uncertainty, US and EU macroeconomic news. Using an ordinary least squares approach, the results indicated that for regions and countries such as the GCC (Gulf Cooperation Council), Malaysia, Indonesia, Turkey, and Singapore, global shocks play a vital role in explaining Sukuk spreads. Furthermore, employing a matched sample featuring firms from these regions and countries revealed that European and US macroeconomic announcements and economic policy uncertainty have a significantly greater impact on Sukuk spreads than on conventional bond spreads. The second study builds on the directional spillovers from Sukuk markets to Shariah-compliant equity markets and vice versa. The directions and magnitudes of spillovers are quite disperse among different countries and Islamic equity markets. Novel to the literature, we find that the Islamic equity markets' profitability and liquidity positions are highly influential on the magnitude of spillovers. We create a matched sample for 38 firms that issued both Sukuk and Islamic equities. Implementing similar spillover models, we indicate that firms' firm-level profitability and liquidity positions are essential in modeling the spillovers' magnitude between Sukuk and equities. Finally, the third study explores spillovers from regional and global equity markets to sectoral equity indices for several different regions/countries. First, we investigate sectoral equity return spillovers' connectedness and explore the different patterns and magnitudes of spillovers. Next, we look for the determinants of sectoral equity return spillovers. We find the regional and global markets spillovers on sector equity indices are highly dispersed across different markets. Novel to the literature, we examine the sectors' liquidity and financial positions and find that sector positions are highly influential in explaining the extent of the spillovers. Particularly, our exploration evidence that regional and global spillovers to specific sector equity markets jump significantly when a sector has higher debt and lower interest expense coverage. Similarly, higher profit margins of the sector make it less vulnerable to global and regional shocks. We also find market capitalization of the sectors inversely affects the spillovers' extent originating from global and regional markets.
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    Essays on Islamic equity investment : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University, Auckland, New Zealand
    (Massey University, 2020) Chowdhury, Md Iftekhar Hasan
    This thesis presents three self-contained studies on Islamic equity investment. Each of these studies contribute to advance understanding of the mechanics of investing in the rapidly growing Islamic equity market. The first study inspects the systematic risk exposure of a sample of equities domiciled in the United States that have transitioned to ethically screened, Shari’ah compliant, Islamic equities. The conjecture is that the anterior and posterior risk exposures will not be analogous. Our results indicate that Shari’ah compliance initially creates a shock in systematic risk, but transitional behaviors subsequently diverge. Particular screening ratios also behave similarly. In effect, the capital market reinforces the risk position and increases systematic risk. However, this is essentially a transition effect. Over the entire period, we find a downward trend in systematic risk. Shari’ah compliance makes the adopted equities less risky over the long-term with improved market information. Our findings hold even after controlling the screening ratios and conducting a number of robustness checks. The second study examines pair-wise, net, and total return and volatility spillovers across Islamic equity markets from widely dispersed locations. Using the generalized VAR-based spillovers index, we find increasing interactions in return and volatility spillovers while the extent of spillovers has been asymmetric across the countries. Interestingly, we find the presence of persistent clustering of spillovers. These clustered countries lead Islamic equity return and volatility spillovers in their respective regions. We do not find any supremacy of the cash and oil-rich GCC countries outside their region. Our results also highlight that in the crisis period, aggregate spillovers across the Islamic equity markets intensify. Additionally, we employ cross-section analyses to uncover the underlying macroeconomic variables influencing the magnitude of such spillovers. We find a convincing indication of geographic proximity along with economic linkages that explain the directions of return and volatility spillovers. The third study explores the investment style of actively managed Islamic equity funds domiciled in both Islamic and non-Islamic countries. We find that Islamic funds initially overwhelmingly skewed to value stocks in Islamic countries and growth stocks in non-Islamic countries. However, there is an increasing shift from these styles to a deep blend orientation. Similarly, we report a trend from initial mid-cap stocks to large-cap stocks in Islamic countries. In contrast, there is a consistent extreme large-cap tilt in non-Islamic countries. We conjecture such deportment as an extrapolative consideration. After inspecting the apparent shift in style over the years, we reveal strong evidence of style shift, with a higher rate in Islamic countries. Collectively, the propensity is larger in asset types than in asset sizes. Islamic funds are more likely to alter their portfolio exposure in the sight of negative performance. More mature funds in Islamic countries are more likely to shift often. Funds from non-Islamic countries are less likely to shift when the market is relatively volatile.