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.

This study examines the impact of foreign aid on the institutional quality (IQ) of the OIC countries. Using the data of OIC countries for the three-year average period from 1991 to 2016, the system GMM finds that aid in general deteriorates the IQ for the aid recipient countries. However, quantile regression suggests that the negative impact of foreign aid on institutional quality (IQ) is relatively greater in the countries where the existing quality of institution is poor. The findings of the study suggest that improving the existing capacity is essential for reaping the optimum benefit of foreign aid on institutional development.

In spite of the expanding number of studies investigating the effect of institutional quality on capital flows, a very few attempts has been made to investigate the impact of capital flows on the institutional quality of host countries.This study investigates the role of capital flows on the institutional infrastructure of the OIC countries, which are divided into three separate essays. The first essay investigates the impact of the official development assistance (ODA) on the institutional development of the OIC counties. The research uses system GMM, and the data for this study is obtained from 40 OIC countries for the three-year average period from 1991 to 2016. Empirical findings suggest that aid reduces the Institutional quality for the aid recipient countries. For robustness test and heterogeneous relationship among aid recipient countries, this study uses panel quantile regression and finds that foreign aid generally reduces Institutional quality, and its reduction effect is greater in less institutionally developed countries ...

The capital structure choices of a firm not only determine the current value of the firm, but also largely determine its long-term survival. Modigliani and Miller's seminal 1958 paper explicates conventional firms' capital structure choices. However, we are yet to develop a solid theoretical framework about the financing decisions of Islamic firms. This is a review chapter on current developments in the field of Islamic capital structure. The chapter starts with a short discussion about the various sources of capital and their advantages and disadvantages, followed by a detailed description of traditional capital structure theories and their real-world empirical evidence. Finally, it discusses how the capital structure decision for Islamic firms differs from that for conventional firms, and the role sukuk, dual-banking system, and debt threshold play in determining Islamic firms' capital structure

This study is the first attempt to conduct a comparative analysis of the internal and external determinants of the Islamic banks' profitability in the GCC region applying dynamic GMM, quantile regression, and wavelet coherence approaches. The dynamic GMM tends to indicate that equity financing and operating efficiency and macroeconomic variables such as money supply, and inflation are significantly related to Islamic banks' performance. The bank-specific variables such as credit risk, equity ratio, and cost-efficiency ratios are not significant at different percentiles. ROA is driven by credit risk, equity ratio, and cost-efficiency ratios (as evidenced in wavelet coherence analysis).

Despite the rapid growth of Islamic finance in recent years, there has been relatively little work done on the emerging Islamic mutual fund industry within the broad field of Islamic finance. As far as the authors' knowledge, this paper is the first attempt dedicated to understanding the correlation between different sizes of the young and rapidly growing Islamic mutual fund industry at different investment horizons. Major part of economic time series analysis is done in time or frequency domain separately. Wavelet analysis can combine these two fundamental approaches, so we can work in the time-frequency domain. Using wavelet coherence, we have gained valuable insights into the continuous dynamics of correlation between small, medium and large size Islamic mutual funds at different investment horizons for reaping the benefits of portfolio diversification in particular and keeping contagion risk at bay.

Sukuk is a highly appealing alternative instrument of conventional bond in the financial market over the last two decades. To a certain extent, the market players assume sukuk as the same as bond. However, sukuk has its own fundamental asset backed principles, whereas bond is backed by debt. The objective of the study is to examine the Granger-causality and lead-lag relationship between sukuk and bond by using the data of the Malaysian Government securities return for both conventional and Islamic instruments. The data for every working day of 7 years covering the period from January 31, 2007 to December 31, 2013 were collected from Bloomberg database. The yield returns of both securities have been plotted for each six months of a year. This study applied both Granger-causality and dynamic co-movement techniques such as, continuous wavelet transforms (CWT) coherence for analyzing the temporal evolution of the frequency content of both securities by decomposing each period into different time scales. The empirical findings of the paper reveal that with a bit of exception, there is a causal relationship between sukuk securities and conventional bonds for a given period of time. For robustness, this study applied the wavelet coherence approach and found that bond is led by sukuk in the long term investment horizon rather than in the short term. Our findings relating to the lead-lag relationship between sukuk and bonds have important implications in terms of policy regulations and investment management. Future research and market practices could reinvestigate the differences between these two securities across different markets and types