An efficient market has been theoretically proven to be a key component for effective and efficient resource allocation in an economy. This paper incorporates econophysics with Efficient Market Hypothesis to undertake a comparative analysis of Islamic and developed countries’ markets by extending the understanding of their multifractal nature. By applying the Multifractal Detrended Fluctuation Analysis (MFDFA) we calculated the generalized Hurst exponents, multifractal scaling exponents and generalized multifractal dimensions for 22 broad market indices. The findings provide a deeper understanding of the markets in Islamic countries, where they have traces of highly efficient performance particularly in crisis periods. A key finding is the empirical evidence of the impact of the ‘stage of market development’ on the efficiency of the market. If Islamic countries aim to improve the efficiency of resource allocation, an important area to address is to focus, among others, on enhancing the stage of market development

In this study, we conduct a panel analysis of Islamic and conventional banks to ascertain whether Islamic banks are able to sustain financing supply and whether its growth is higher than conventional bank lending growth in times of stress. For concreteness, we also assess whether the sustained financing supply of Islamic banks is justified by a concomitant increase in Islamic deposit growth and is not linked to excessive risk taking. Utilizing a panel sample of 25 Islamic banks and 114 conventional banks from 10 dual-banking countries, we observe sustained financing supply by Islamic banks but significant reduction in the lending growth by conventional banks during the crisis period. The results further suggest that the financing growth of Islamic banks is higher than the lending growth of conventional banks during the crisis period. However, we find no clear evidence that the deposit growth of Islamic banks behaves differently during the period. Finally, there is no indication to suggest that Islamic banks exhibit excessive risk taking in times of stress. Our results contribute to the evidence supporting the contributive role of the Islamic banking system to financial and economic stability.

The slides highlight 1) the importance of risk-taking; 2) variables - risk-taking, bank-specific, macroeconomic, and regulation of the study.

The research is an attempt to have an overview of the need for derivatives and their possible role in Islamic finance, stressing on the Shariah qualification and prohibitions on the controversial conventional derivative products. This research focuses on the derivative products and their role in risk management measures. Islamic financial industry has shown tremendous growth over the past decade but the management of risk is still an unresolved issue in the trillion-dollar Shariah-compliant industry. This paper attempts at having a continuous elaboration on the derivatives from a conventional perspective and closest alternatives that are available in Islamic finance. The findings suggest that conventional derivatives in their original form do not comply with Shariah norms and parameters. But in contemporary literature and thought, there exist Shariah-compliant mechanisms and instruments which provide similar risk management measures for Islamic financial markets.

In this paper, we evaluate from the stability point of view whether Islamic banks should stay small or should be bigger. More specifically, in relating bank stability to bank size, we examine potential non-linear effects of size on bank soundness and the roles regulation plays in strengthening or weakening the size-stability relation using a panel sample of 45 Islamic banks from 13 countries. Our results show that larger Islamic banks are more stable, at least when they surpass a certain threshold size. As regards regulation, activity restrictions and capital stringency play a role in strengthening the stability-size relation. By contrast, the positive stability-size relation is weakened with more private monitoring and supervisory power. Hence, our results point to the benefits of having bigger Islamic banks.They also suggest that, to further enhance the stability implications of larger Islamic banks, policymakers should focus on improving regulation in the forms of activity restrictions and capital stringency.

The purpose of this paper is to analyse the implication of trade on carbon emissions in a panel of eight highly trading Southeast and East Asian countries, namely, China, Indonesia, South Korea, Malaysia, Hong Kong, The Philippines, Singapore and Thailand. The analysis relies on the standard quadratic environmental Kuznets curve (EKC) extended to include energy consumption and international trade. A battery of panel unit root and co-integration tests is applied to establish the variables’ stochastic properties and their long-run relations. Then, the specified EKC is estimated using the panel dynamic ordinary least square (OLS) estimation technique. The panel co-integration statistics verifies the validity of the extended EKC for the countries under study. Estimation of the long-run EKC via the dynamic OLS estimation method reveals the environmentally degrading effects of trade in these countries, especially in ASEAN and plus South Korea and Hong Kong. These countries are heavily dependent on trade for their development processes, and as such, their impacts on CO2 emissions would be highly relevant for assessing their trade policies, along the line of the gain-from-trade hypothesis, the race-to-the-bottom hypothesis and the pollution-safe-haven hypothesis. The analysis adds to existing literature by focusing on the highly trading nations of Southeast and East Asian countries. The results suggest that reassessment of trade policies in these countries is much needed and it must go beyond the sole pursuit of economic development via trade.

This book addresses the financing of government budgets with non-debt-creating flows through risk-sharing capital market instruments. It offers a comparative analysis with conventional finance to demonstrate the ability of Islamic capital market instruments to create an impetus for economic stability and growth.

This study examines market co-movements in Islamic and mainstream equity markets across different regions in order to discover contagion during 9 major crises and to measure integration between markets. Using wavelet decomposition to unveil the multi-horizon nature of co-movement, we find that the shocks were transmitted via excessive linkages, while the recent subprime crisis reveals fundamentals-based contagion. While Islamic markets show traces of reduced exposure to the recent crisis owing to low leverage effect, their less diversified portfolio nature increases vulnerability to other crises. We generally find incomplete market integration, with relatively higher fundamental integration for Islamic markets which may be attributable to their real sector allocation nature.

In the current era of globalization, deregulation and liberalization of markets have led to financial integration amongst developing and developed countries. The sudden massive inflow of capital into developing country's stock markets begs the question of whether or not the markets are sufficiently efficient to handle the increasing integration of markets. Furthermore, the relationship between the integration and efficiency of stock markets tends to be of greater importance during economic downturns. Taking Turkey as a case study owing to its economic growth and importance in two successful blocs, i.e. the EU and the OIC, we attempt to analyse the linkages between stock market efficiency and integration during the different phases of the economy. The findings of our study provide an interesting insight into the relative improvement in volatility, efficiency and integration across business cycles, in a multi time scale analysis.

Over the past decades much effort and research has gone into establishing a viable set of Islamic financial institutions. An area of utmost importance, which still has gaping holes, is the development of instruments for government financing on a global level. Most developing countries including the bulk of Muslim nations, are heavily indebted with high reliance on multilateral financing primarily based on high interest rates. This vicious cycle of interest rates and debt have stunted the growth of these nations and worsened the conditions of the masses. This research brings to the forefront the concept of an equity in nature GDP linked paper, which allows for enhanced risk sharing based sovereign financing ...

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.