Volatility and information behavior : a study on Sharīah index and general index

Abstract EN

-The fact that there is an increased demand for Sharīʿah-based financial products demands modeling the risk-return structures of such products for the benefits of investors, practitioners, and policymakers.

This study attempts to discover the superiority of information and volatility patterns of Sharīʿah-based indices over the general index traded in the Malaysian stock exchange.

The Vector Error Correction Model combined with EGARCH is administered to achieve the objectives of this study.

The findings imply the existence of a long-term equilibrium relationship between the two types of stocks and a contemporaneous as well as a bi-directional lead-lag association between a Sharīʿah-based index and the general index.

Volatility spillover and mixed levels of persistence are also identified.

It is also noticed that the information superiority cannot be attributed to any of these indices.

The study concludes that there is not much difference between a Sharīʿah-based index and a general index in terms of performance