Journal of Energy Markets
ISSN:
1756-3607 (print)
1756-3615 (online)
Editor-in-chief: Derek W. Bunn
A dynamic conditional correlation between commodities and the Islamic stock market
Need to know
- This paper investigates empirically the importance of the dynamics of the correlations between commodities and Islamic indices.
- The authors use the EC-GARCH model which allows us to assess the causality and the dynamic correlations between commodities and Islamic indices.
- The empirical findings support the view that volatilities of commodities returns are strongly correlated to those of Islamic indices.
- This paper contributes importantly to both empirical literature dealing with the links between commodity and stock markets and the literature supporting the financialization of commodity markets.
Abstract
ABSTRACT
Following the outbreak of the financial crisis and falling prices in the financial markets, we noticed the existence of several recent studies on the relationships between commodity and stock markets. More specifically, our paper is most closely related to those documenting the importance of the links between Islamic capital markets and commodities. To this end, we focus on the dynamics of the correlations between commodities and Islamic indexes. From a methodological viewpoint, we start this paper by examining the approaches of EC-GARCH and DCC-GARCH, which allow us to assess, respectively, the causality and how the correlations between commodity and stock returns evolve over time. To test our models empirically, we build a daily data set, consisting of commodity and stock prices. The sample period used in this paper is May 19, 2010-February 14, 2014. Our empirical evidence supports the view that volatilities of commodity returns are strongly correlated to those of Islamic indexes. In fact, correlations between commodity and Islamic stock markets are time-varying and highly volatile. Our paper contributes importantly to the empirical literature dealing with the links between commodity and stock markets and the literature supporting the financialization of commodity markets.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net