Journal Article

The objective of this study is to examine the impact of the U.S. subprime crisis on the long-term and short-term dynamic relationships between selected Asia-Pacific Islamic stock markets and conventional stock markets in the region. The comovements among these stock markets are examined through cointegration tests, and vector error correction model-based Granger causality tests, for the period from February 2006 to December 2010. The study reveals that, after the debut of the U.S. subprime crisis, Asia-Pacific Islamic stock markets increasingly integrated among themselves and with their conventional counterparts. In addition, the conventional markets of the United States and Japan significantly influence the short-run fluctuations of Asia-Pacific Islamic and conventional markets.

During the last two decades, the phenomenon of financial contagion has been investigated in numerous pieces of research. In spite of its severe implications for the stability of domestic financial systems as well as potential diversification benefits of international portfolio investment, there has yet to be universally agreed conclusion on the relevance of financial contagion. Thus, our current study has been designed to apply the meta-analysis approach to investigate the statistical significance of financial contagion based on past empirical contagion studies. Our meta-analysis concludes that financial contagion is a significant phenomenon. As implications, policy makers should establish contingent credit lines to ensure the liquidity of financial market during the turbulence time, and portfolio investors should diversify away from the potentially contagious markets. It is suggested that future contagion-based meta-analysis may include contagion studies with different methodologies, as well as meta-regression analysis to provide more insights on the sources of variability in the contagion studies.

We assess the contagion effect of the global financial crisis (GFC) and the European debt crisis (EDC) on Islamic and conventional stock market indices of the US, GCC and Malaysia. We run the asymmetric dynamic conditional correlation GARCH specification on daily closing prices of relevant indices from 1 January 2006 through 31 December 2016. Our results show that the Malaysia Islamic stock market is exempted from the contagion effect of GFC and EDC when the shock stems from the US Islamic stock market. Investors in the US Islamic equity markets can create a safety net by reallocating some of their portfolios into Malaysia Islamic stock market, which appears to be more resilient. However, we do find a significant contagion influence between the US Islamic and GCC Islamic stock market, suggesting that the GCC Islamic stock market cannot provide an effective hedge for the US investors seeking a Shariah-compliant investment. Contagion effect generally is inconsistent and not significant for conventional stock markets of these three countries.

This paper aims to portray the publication pattern, key themes, study trends and future directions for the studies on ethics in Islamic finance. A total of 194 published documents that includes journal articles, books and book chapters and conference proceedings were screened for the period 1988 to August 2022 and categorized based on designated sectors of the Islamic finance industry. This paper also highlights the change in research trends in all three sectors of Islamic finance and suggests possible areas for future research. A comprehensive systematic literature review was conducted using the “advanced search” function of “google scholar” by using the option “find articles” with the keywords “Ethic (s/al)”, “Islamic banks”, “Islamic banking”, “Islamic finance”, “Islamic capital markets”, "Takaful, Islamic insurance" without restricting the time frame, author list and the platform. Furthermore, the search for relevant articles was conducted on other mainstream index databases such as “Web of Science” and “Scopus”. Among the highlights of the findings were an increase in publications on ethical issues after the global financial crisis and an increase in publications in high-impact mainstream business and finance journals. A higher number of studies were documented in the area of Islamic banking and finance followed by Islamic capital markets and Islamic insurance/takaful. Although a greater number of empirical studies were published than conceptual studies, dominance was resulted due to the replication of the studies in various jurisdictions based on the same concepts or models rather than applying diversified concepts in various jurisdictions.

Equity trading through stock markets is a popular avenue for investors to obtain capital gain and profits. However, a much less known stock exchange has also existed in the conventional markets known as the social stock exchange (SSE). Conventional SSE initiatives have been successful among a few conventional economies such as Brazil, Canada, Singapore/Mauritius and recently India. An SSE enables social enterprises that have as their business social and environmental causes to list their projects or instruments for investors to invest in. Unlike for-profit stock exchanges, an SSE’s aim is not monetary gain for the investors but returns in terms of counteracting social upheaval and environmental conservation. In other words, impact investment is the aim of investors. Thus, investors impact the world through their investments in the social enterprises on the exchange. This research examines the prospect of developing a digital Islamic social stock exchange (ISSE) and proposes that Islamic economies can pilot an ISSE to deploy the Shariah vision of philanthropy, investment and sustainability. In expounding this proposal, the research reviewed the SSE of Brazil, Canada, Singapore/Mauritius and India and conducted three in-depth interviews with prominent scholars in this area. While paving the way to enable social enterprises whose goals are social and environmental causes to obtain funding, appropriate exposure and connections, the research neatly situates social stock exchange within the principles of Shariah and ascertains the need for establishing an ISSE. The research accordingly formulated suggestions about requisite legal, regulatory and Shariah elements for establishing a digital ISSE and its operating structures.

We examine the risk minimization utility of Islamic stock and sukuk (bond) indices by studying their linkages against traditional global counterparts. We first employ an asymmetric power ARCH-based ADCC model on an extended dataset employed by Kenourgios et al. (2016). Our sample ranges from July 2007 to June 2021 covering the Global Financial Crisis (GFC), the European Sovereign Debt Crisis (ESDC), and the COVID-19 pandemic. Econometric tests suggest strong evidence of coupling in the bulk of Islamic equity indices. A handful of emerging market indices constitute exceptions. Qualitatively similar results emerge from time–frequency analysis via wavelet tools, revealing pervasive coupling in both returns and volatility series. The linkages are scale-dependent in only a few pairs. In contrast, sukuk indices are uncoupled from their global fixed income counterparts and relevant risky debt portfolios. In sum, the risk-return characteristics of Islamic equities (especially in developed economies) remain coupled to major global benchmarks and therefore are unlikely to appeal as safe haven candidates. The converse applies to sukuk, which promises potential portfolio diversification benefits and safe haven status in ‘normal’ and crisis periods.