Obiyathulla Ismath Bacha
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- PublicationPerformance and trading characteristics of exchange traded funds: developed vs emerging marketsAftab Parvez Khan; Abul Mansur Mohammed Masih; Obiyathulla Ismath Bacha (Bursa Malaysia, 2015)
Exchange Traded Funds (ETFs) are one of the most successful financial innovations of the last decades. The main focus of this study is to examine the risk adjusted performance, tracking error and trading characteristics of emerging and developed markets ETF. 43 passively managed equity ETFs have been chosen to cover both markets. The results indicate that the emerging markets are less efficient in terms of index replication and possess higher tracking error compared to the developed market ETF. Conversely, emerging markets provide better risk adjusted performance. Last but not least, it is also found that assets size has positive impacts towards ETFs performance and in contrast, the expense ratio has a negative impact on ETFs performance. To determine the policy matters, investment types and strategy for the two different types of capital market products, this study is quite relevant to the individual investor, institutional investors, policy makers and the regulators.
- PublicationEmpirical evidence of risk shifting in bonds and debt-based sukuk: the case of Malaysian corporationsSiti Raihana Hamzah; Abbas Mirakhor; Nurhafiza Abdul Kader Malim; Obiyathulla Ismath Bacha (Emerald Publishing Limited, 2018)
The purpose of this paper is to examine the extent of risk shifting behavior in bonds and sukuk. The examination is significant, as economists and scholars identify risk shifting as the primary cause of the global financial crisis. Yet, the dangers of this debt-financing feature are largely ignored - one needs to only witness the record growth of global debt even after the global financial crisis. To identify the signs of risk shifting existence in the corporations, this paper compares each corporation's operating risk before and after issuing debt. Operating risk or risk of a firm's activities is measured using the volatility of the operating earnings or coefficient variation of earning before interest, tax, depreciation and amortization (EBITDA). Using EBITDA as the variable offers one distinct advantage to using asset volatility as previous research has - EBITDA can be extracted directly from firms' accounting data and is not model-specific.
- PublicationRisk-return characteristics of Islamic equity indices: multi-timescales analysisGinanjar Dewandaru; Abul Mansur Mohammed Masih; Rumi Masih; Obiyathulla Ismath Bacha (Elsevier, 2015)
This paper is motivated by the heightened interest in investing in Islamic equities. The paper is the first attempt at analysing the risk-return characteristics of Islamic indices at different timescales by applying a relatively new approach in finance known as wavelet analysis. We analyze the Dow Jones indices of 11 countries, mostly emerging markets, and 10 global sectors between 2008 and 2012. We focus on exploring the multi-horizon nature of systemic risk (market beta), average return, volatility, and correlation. We find that the differences in betas between Islamic and conventional indices at most of the timescales are not statistically significant. A few exceptions show equal returns with lower risks for Islamic indices mostly at higher time scales (longer horizons) in some countries as well as 6 out of 10 sectors. We also find lower correlations for some Islamic sector-pairs (financials, utilities and consumer services) at lower time scales (shorter horizons).
- PublicationWhat factors explain stock market retardation in Islamic countriesGinanjar Dewandaru; Syed Aun Raza Rizvi; Abul Mansur Mohammed Masih; Obiyathulla Ismath Bacha (Elsevier B.V., 2014)
Stock markets have been recognized in literature as a source of financial development and economic growth. Notwithstanding the recent trend of the stock market development in emerging countries, some argue that Islamic countries' stock exchanges are still infantile. The central aim of this research, therefore, is to investigate factors impeding stock market development (SMD) in Islamic countries. We explore a panel annual data of 11 main Islamic countries vis-à-vis the developed countries for the period of 1996–2011. The findings show that all of our concerned macroeconomic determinants play a major role in the developed countries. On the other hand, financial openness has substantially less contribution in Islamic countries, while the financial intermediary development plays a major role. The results are also indicative of the need for the Islamic countries to improve their legal environment and economic freedom. Lastly, we also attempt to measure the integration level, where the findings tend to indicate a relatively lower and unstable pattern of integration for the Islamic countries, suggesting the impact of volatile inflows.
- PublicationThe efficiency of trading halts: emerging market evidenceMohamed Eskandar Shah Mohd Rasid; Roslily Ramlee; Obiyathulla Ismath Bacha (Bond University, 2008)
This paper reports new findings on the price effect from trading halts - both voluntary and mandatory - over 2000-04 in an emerging share market, Malaysia. Based on our overall sample, trading halts lead to positive price reaction, increased volume, and increased volatility. We found evidence of information leakage resulting in a significant difference between voluntary and mandatory halts as well as the type of news released during halts to warrant such an impact. The duration of the halt has an isolated impact and is largely inconsequential. The frequency of halts does not seem to matter.
- PublicationToo small to succeed versus too big to fail: how much does size matter in banking?Marjan Naseri; Abul Mansur Mohammed Masih; Obiyathulla Ismath Bacha (Taylor & Francis Group, 2020)
Even though large banks could imply large risks and heightened vulnerability for a country's macroeconomy, the presence of many small banks with similar behavior such as Islamic banks could also cause systemic risks. This article makes an initial attempt to investigate the impact of bank size on banking performance. Our study spans 12 emerging countries with dual banking systems and applies two-step dynamic system GMM estimator. The results show that size really does matter in the banking industry, and its impact on performance tends to be non-linear with a trade-off between profitability and efficiency. Comparing conventional with Islamic banks, we find that bank size has almost the same impact on the performance of both types of banks.
- PublicationCapital structure and Shari'ah compliance firms: Malaysian evidenceAsyraf Abdul Halim; Mohd Edil Abd Sukor; Obiyathulla Ismath Bacha (Palgrave Macmillan, 2019)
In the literature of corporate finance, there exists alongside others, an age long inquiry into the behaviour and determinants of corporate capital structure. The study into capital structure behaviour was pioneered by Modigliani and Miller (1958, 1963) and which is still widely research today. Despite years of research, much are still unknown to us, which determinants are reliable explanator of capital structure variations across firms and time. In 1984, Stewart C. Myers officially introduced the "Capital Structure Puzzle" in his American Finance Association Presidential Speech. The capital structure puzzle at its heart asks the question of how do firms decide and manage their capital structure?
- PublicationCombining momentum, value, and quality for the Islamic equity portfolio: multi-style rotation strategies using augmented Black Litterman factor modelDewandaru, Ginanjar; Masih, Rumi; Mohammed Masih, Abul Mansur; Obiyathulla Ismath Bacha (Elsevier, 2015)
This study constructs active Islamic portfolios using a multi-style rotation strategy, derived from the three prominent styles, namely, momentum, value, and quality investing. We use the stocks that are consistently listed in the U.S. Dow Jones Islamic index for a sample period from 1996 to 2012. We also include two macroeconomic mimicking portfolios to capture the premiums of industrial production growth and inflation innovation, accommodating the economic regime shifts. Based on the information coefficients, we find the six-month momentum and the fractal measure as momentum factors; the enterprise yield (gross profit/TEV) and the book to market ratio as valuation factors; the gross profit to total assets, the return on capital, and the scaled total accruals as quality factors. We further construct active portfolios using the augmented Black Litterman (ABL) factor model to avoid the factor alignment problem, with the factor views predicted using Markov Switching VAR, MIDAS, and Bayesian Model Averaging. The out-of-sample performance of our portfolios can produce information ratios of 0.7–0.8 over the composite indices, and information ratios of 0.42–0.48 over the style indices, with the annualized alphas of 10–11%. Even when we put the constrained tracking error of 1% over the benchmark, our portfolios still produce information ratios of 0.9–1.2 before transaction costs, and 0.6–0.8 after transaction costs. We provide intuitive explanations for each premium changing over time, and suggest the promising strategy for Islamic equity investors to outperform the market.
- PublicationAvoiding the debt trap: funding development infrastructure with risk sharing sukukObiyathulla Ismath Bacha (2017)
The slides highlight: 1) funding growth without debt; 2) risk sharing contracts of Islamic finance; 3) issue and challenges.
- PublicationRegional currency arrangements come with huge challengesObiyathulla Ismath Bacha (The Edge Communications Sdn. Bhd., 2023)
De-dollarising seems to be in vogue these days. China, Russia and their BRICS (Brazil, Russia, India, China and South Africa) partners may have initiated the narrative but the desire to remove or at least reduce the US dollar's hegemony has spread. Many nations, including Malaysia, have openly articulated their desire to move away from US dollar dependence for their trade. Though it has been a long time coming, the rising disdain of the US dollar is in no small part due to American policy hubris and abuse of its reserve currency status. As the only country that can repay its foreign debt in its own currency, it has run years of current account deficits, created a mountain of debt surpassing US$30 trillion (RM136 trillion) and effectively piggybacks on the rest of the world with its autarchic monetary policies.
- PublicationDuration gap and net worth risk for Islamic and conventional banks: a comparative cross country analysisJamshaid Anwar Chattha; Obiyathulla Ismath Bacha (International Association for Islamic Economics, 2010)
This paper undertakes a comparative analysis of the Duration Gap and Net Worth (NW) risk of Islamic Commercial Banks (ICBs) and Conventional Commercial Banks (CCBs). Though Islamic banks work on interest-free principles, the vast majority of the world’s ICBs operate within dual banking systems. The inevitable flow of funds between the two banking systems and the common customer base implies that ICBs would have the same exposures as CCBs. Our sample consists of a total of 60 commercial banks from nine Islamic countries. These were made up of 30 ICBs and 30 CCBs. Each ICB had a CCB pair of approximately equal asset size in US $ terms.
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