How is the European debt crisis affecting islamic equity challenges in portfolio diversification within the eurozone: A markov switching and continuous wavelet transform analysis Report as inadecuate




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Abstract

The European Debt crisis hit hard on the Eurozone, where the market convergence, rigid exchangerates and the single currency based instruments create tight challenges for investors in terms oflooking for safer investments and portfolio diversification. Islamic Equity markets in Eurozoneprovide safety compared to debt based highly volatile derivatives that caused the global financialcollapse. Since it is critical to study areas with implications for the portfolio diversification issuefor the investors and policy makers from the perspective of Islamic Equity markets, this papermakes the humble effort of filling in the gap in literature. The paper analyses how the IslamicEquity Markets in the Eurozone change in periods of crisis analyzing their regime shiftprobabilities and durations using Markov- Switching techniques. Overall, the time-variations inmarket indices suggest that the Islamic Equity markets in Eurozone are not immune to externalshocks and they tend to fluctuate with the economic and financial shocks. The study also showshow Islamic Market investors, from Germany’s perspective could find any optimal diversificationopportunities inside the Eurozone and shows if there is a need for investing outside the Eurozoneto maximize diversification benefits by empirically testing the time-varying and scale dependentvolatilities and correlations using the method of Continuous Wavelet Transform. The periodcovered is from 12 June 2008 till 21 April 2016, with spans of weekly data of SandP Europe 350Shariah – SandP Dow Jones Indices stock index prices changed into returns using logarithmicequations. The results of the study shed light into the area pf portfolio diversification between thestudied countries within the Eurozone, showing very little diversification opportunities betweenthe member countries. Overall there is little room for diversification in the highly correlatedmarkets across heterogeneous investment horizons.



Item Type: MPRA Paper -

Original Title: How is the European debt crisis affecting islamic equity? challenges in portfolio diversification within the eurozone: A markov switching and continuous wavelet transform analysis-

English Title: How is the European debt crisis affecting islamic equity? challenges in portfolio diversification within the eurozone: A markov switching and continuous wavelet transform analysis-

Language: English-

Keywords: International Portfolio Diversification, Eurozone Islamic Equity Markets Stock, Markov Switching, Continuous Wavelet Transform-

Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial EconometricsG - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions-





Author: Shakir, Zeeniya

Source: https://mpra.ub.uni-muenchen.de/71683/



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