Co-movement dynamics between global sukuk and bond markets: new insights from a wavelet analysis
Purpose – Market links (and price discovery) between financial assets and lead–lag relationships are topics of interest for financial economists, financial managers and analysts. The lead–lag relationship analysis should consider both short and long-term investors. From a portfolio diversification...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English English English |
| Published: |
Emerald Group Publishing Ltd.
2019
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/73654/25/73654_Co-movement%20dynamics%20between_article.pdf http://irep.iium.edu.my/73654/19/73654_Co-movement%20dynamics%20between%20global%20sukuk_Scopus.pdf http://irep.iium.edu.my/73654/26/73654_Co-movement%20dynamics%20between_wos.pdf http://irep.iium.edu.my/73654/ https://www.emerald.com/insight/content/doi/10.1108/IJOEM-12-2017-0521/full/html |
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| Summary: | Purpose – Market links (and price discovery) between financial assets and lead–lag relationships are topics
of interest for financial economists, financial managers and analysts. The lead–lag relationship analysis
should consider both short and long-term investors. From a portfolio diversification perspective, the first type
of investor is generally more interested in determining the co-movement of financial assets at higher
frequencies, which are short-run fluctuations, while the latter concentrates on the relationship at lower
frequencies, or long-run fluctuations. The paper aims to discuss these issues.
Design/methodology/approach – For this study, a technique was employed known as the wavelet
approach, which has recently been imported to finance from engineering sciences to study the co-movement
dynamics between global sukuk and bond markets. Data cover the period fromJanuary 2010 to December 2015.
Findings – The results indicate that: there is no unidirectional causality from developed market bond indices
to Malaysia and Dow Jones indices, which is promising for fixed-income investors of a developed market; and
in relation to emerging markets, the Malaysian sukuk market has a bidirectional causality with Indonesia,
Malaysia, India and South Korea bond indices but not China bond indices, while in terms of the Dow Jones
sukuk index, there is no unidirectional causality between the listed emerging markets and the sukuk index
except Indonesia’s market during the sample period.
Research limitations/implications – This analysis provides evidence regarding the timely and
appropriate measure of correlation changes and the behaviour of sukuk and bond indices globally, which is
beneficial to the management of sukuk and bond portfolios.
Originality/value – The evidence hitherto unexplored, which was produced by the application of a wavelet
cross-correlation amongst the selected sukuk and bond indices, provides robust and useful information for
international financial analysts as well as long and short-term investors. |
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