Assessing the Resilience of Islamic Stocks in BRIC Countries: Analyzing Coherence and Cointegration with S&P 500 Options Implied Volatility Smirk during the Global Financial Crisis

Ariful Hoque; Tanvir Bhuiyan; Thi Le

doi:10.3390/ijfs12030067

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Assessing the Resilience of Islamic Stocks in BRIC Countries: Analyzing Coherence and Cointegration with S&P 500 Options Implied Volatility Smirk during the Global Financial Crisis

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Assessing the Resilience of Islamic Stocks in BRIC Countries: Analyzing Coherence and Cointegration with S&P 500 Options Implied Volatility Smirk during the Global Financial Crisis

Ariful Hoque, Tanvir Bhuiyan and Thi Le

International journal of financial studies, Vol.12(3), 67

2024

DOI: https://doi.org/10.3390/ijfs12030067

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Abstract

GFC

smirk

options

financial crisis

Islamic stock

BRIC countries

Challenging the perceived immunity of Islamic stocks to the global financial crisis, this research investigates whether there was any coherence and long-run cointegration between Islamic stocks of BRIC countries and S&P 500 options implied volatility smirk (IVS) in BRIC countries during the global financial crisis (GFC). Employing Engle–Granger and Johansen’s cointegration tests along with wavelet coherence analysis, this study reveals significant long-run cointegration and both short-term and long-term wavelet coherence between IVS and Islamic stock returns (ISRs). Since the S&P 500 options IVS is a reliable indicator of GFC in the context of the conventional stock market, the cointegration and coherence between ISRs and IVS indicate the susceptibility of ISRs to market contagion during the GFC. These findings challenge the notion of Islamic stocks as a safe haven during financial crises, showing their susceptibility to market downturns similar to conventional stocks.

Details

Title: Assessing the Resilience of Islamic Stocks in BRIC Countries: Analyzing Coherence and Cointegration with S&P 500 Options Implied Volatility Smirk during the Global Financial Crisis
Authors/Creators: Ariful Hoque - Murdoch University, College of Business
Tanvir Bhuiyan - Murdoch University, College of Business
Thi Le - Murdoch University, College of Business
Publication Details: International journal of financial studies, Vol.12(3), 67
Publisher: MDPI
Number of pages: 33
Identifiers: 991005707264807891
Murdoch Affiliation: College of Business
Language: English
Resource Type: Journal article

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