Volatility spillovers among Islamic countries and geopolitical risk
Journal of Islamic Accounting and Business Research
ISSN: 1759-0817
Article publication date: 11 May 2023
Issue publication date: 28 May 2024
Abstract
Purpose
This paper aims to test for volatility spillovers among Islamic stock markets with the exogenous impact of geopolitical risk (GPR) to check the risk transmission among Saudi Arabia, Malaysia, Indonesia and Turkey. Researchers test for both the symmetric and asymmetric risk transmission.
Design/methodology/approach
For the symmetric response of volatility, the study uses simple generalized autoregressive conditional heteroscedastic (GARCH) and for the asymmetric response of volatility with the exogenous impact of GPR, the exponential GARCH models have been adopted.
Findings
The results suggest spillover effects exist from Turkey to Saudi Arabia, Indonesia to Malaysia and Saudi Arabia and Malaysia to Indonesia. The findings of volatility spillover from GPR to sample countries suggest that only Malaysia and Indonesia experience volatility spillovers from GPR.
Research limitations/implications
The present study is limited to the context of four countries and Islamic equities; the study contributes to the literature on volatility spillover, Islamic finance, GPR and asset pricing.
Practical implications
This study contributes to individual, institutional investors’ policymakers’ knowledge in determining security prices, trading plans, investment hedging and policy regulation.
Social implications
The extant literature disregards the GPR index to examine the volatility spillover effects among Islamic stock markets, which allow researchers to justify the mechanism of risk transmission due to GPR across the Islamic stock market.
Originality/value
To the best of the authors’ knowledge, this is the first research of its type to look at volatility spillover and GPR transmission in Islamic stock markets.
Keywords
Acknowledgements
There are no conflicts of interest to declare in relation to this research. Additionally, this research received no external funding or financial support from any organization, public or private. There are no acknowledgements to declare.
Citation
Oad Rajput, S.K., Memon, A.A., Siyal, T.A. and Bajaj, N.K. (2024), "Volatility spillovers among Islamic countries and geopolitical risk", Journal of Islamic Accounting and Business Research, Vol. 15 No. 5, pp. 729-745. https://doi.org/10.1108/JIABR-07-2022-0173
Publisher
:Emerald Publishing Limited
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