Publication:
Cross-country evidence of Islamic portfolio diversification: are there opportunities in Saudi Arabia?
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Date
2018
SDG:
Abstract
On the backdrop of growing importance of Shariah compliant equity markets, the purpose of this paper is to study cross-country portfolio diversification benefits for investors with major trading partners of Saudi Arabia, namely, USA, China, Japan, Germany and India, who have already invested or tend to invest in Saudi Arabian stock market. The authors have investigated time invariant, dynamic correlations at different investments horizons of the investors among Islamic asset classes by applying relevant econometric techniques like multivariate generalized autoregressive conditional heteroscedastic - DCC and continuous wavelet transforms. For robustness, this study also applied maximal overlap discrete wavelet transform. The findings tend to indicate that the Saudi Arabian investors have portfolio diversification benefits with all major trading partners in the short-term investment horizon. Interestingly, Saudi Arabian market has the least portfolio diversification benefits with the Chinese market. However, in the long run, all markets are correlated, yielding minimum portfolio diversification benefits and most importantly Saudi Arabian investors have portfolio diversification benefits with the Indian Islamic equity market in almost all investment horizons. The findings are highly consistent across different econometric technique estimations.
Keywords
Saudi Arabia , Emerging markets , MGARCH-DCC , Wavelet , International portfolio diversification
Citation
Ali, M. H., Uddin, M. A., & Chowdhury, M. A. F., & Mohammed Masih, A. M. (2019). Cross-country evidence of Islamic portfolio diversification: are there opportunities in Saudi Arabia? Managerial Finance, 45(1), 36-53. https://doi.org/10.1108/MF-03-2018-0126
Publisher
Emerald Publishing Limited