Hedging effectiveness of Islamic single stock futures in bursa Malaysia

الملخص EN

The main aim of this study is to investigate the hedging effectiveness of Islamic Single Stock Futures as Shariah-compliant instruments in Bursa Malaysia.

We use two hedge ratio estimation methods: vector autoregressive model and Vector Error Correction Model by employing the daily end prices of Islamic SSFs and their spot prices for the period 31 May 2017 to 30 August 2018.

The results showed that the Islamic Single Stock Futures have a low hedging ratio of 06% to 19% and SSFs aren't effective tools for hedging risk.