DOES COVID-19 AFFECT SHARIAH COMPLIANT STOCK? EVIDENCE FROM SELECTED OIC COUNTRIES
Keywords:
Co-integration, Covid-19 cases, Islamic stock market, OIC countries, VECMAbstract
This study aims to examine the movements of Islamic stock markets in ten selected OIC (Organization of Islamic Cooperation) countries in relation to Covid-19 cases, providing a comprehensive analysis of market behavior during the pandemic. The countries—Saudi Arabia, Pakistan, Bangladesh, Turkey, Indonesia, Oman, Qatar, UAE, Kuwait, and Bahrain—were chosen based on their large Muslim populations. Data was collected over a one-year period from January 1, 2020, to January 31, 2021, analyzing the relationship between Covid-19 cases and Islamic stock market indices. The study employed co-integration tests to identify long-term relationships and the Vector Error Correction Model (VECM) to explore short-run dynamics. The co-integration test results show a significant long-run relationship between Covid-19 cases and Islamic stock markets in most of the selected OIC countries. Specifically, the Shariah indices in Pakistan, Bangladesh, Turkey, Qatar, UAE, Kuwait, and Bahrain have a positive and significant relationship with Covid-19 cases. Conversely, Saudi Arabia, Indonesia, and Oman exhibit a negative long-term relationship with Covid-19 cases, suggesting a different market response. These results suggest that countries with diversified economies, particularly those relying on natural resources such as oil and agriculture, were more resilient during the pandemic. This study provides novel insights into the unique responses of Islamic stock markets in OIC countries during the pandemic, highlighting regional differences in market behavior and recovery. It suggests that despite the global economic downturn, OIC countries present attractive investment opportunities, particularly due to their swift recovery and resource-based economies, offering a robust portfolio for investors during crises.
Downloads
References
Arshad, S. (2017). Stock Markets in Islamic Countries. Malaysia: Palgrave MacMillan.
Chellaswamy, K. P., N. N., & Faniband, M. (2021). Stock Market Reforms and Stock Market Performance. International Journal of Financial Research, 202-209.
Daily Sabah. (2020, Jan 27). Islamic banking assets in Turkey to double in 10 years, Moody's says. Retrieved fromhttps://www.dailysabah.com/economy/2020/01/27/islamic-banking-assets-in-turkey-to-double-in-10-years-moodys-says
Enders, W. (1995). Applied Econometric Time Series, 2nd Edition. USA: Wiley & Sons, Incorporated, John.
Fahy, M. (2020, Sept 30). Saudi Arabia set to strengthen lead as world's biggest Islamic finance market. Retrieved fromhttps://www.thenationalnews.com/business/banking/
Fitch Ratings. (2020, November 12). Kuwaiti Islamic Banks' Asset Quality and Profitability Under Pressure. Retrieved from https://www.fitchratings.com/research/islamic-finance/kuwaiti-islamic-banks-asset-quality-profitability-under-pressure-12-11-2020
Focus Economics. (2020, November 09). Qatar’s Economy to Rebound by 2.9% in 2021 with Rising Domestic and Foreign Demand: FocusEconomics. Retrieved from https://islamicmarkets.com/articles/qatar-s-economy-to-rebound-by-2-9-in-2021-with-rising
Global Islamic Economy Report . (2020, November 16). UAE ranked among top three Islamic economies in world. Retrieved from https://www.khaleejtimes.com: https://www.khaleejtimes.com/news/
Hassan, M. K., & Hussain, M. E. (2009, Jan). Economic Performance of the OIC Countries and the Prospect of an Islamic Common Market. Journal of Economic Cooperation and Development, 461, Working Paper, 1-52.
Hassan, M. K., Bin-Nashwan, S. A., & Muneeza, A. (2022). OIC Economies during the COVID-19: Implications and Recommendations in Towards a Post-Covid Global Financial System: Lessons in Social Responsibility from Islamic Finance. In Towards a Post-Covid Global Financial System: Lessons in Social Responsibility from Islamic Finance (pp. 23-36). UK: Emerald Publishing.
Ibrahim, M. H. (2019). Oil and macro-financial linkages: Evidence from the GCC countries. The Quarterly Review of Economics and Finance, 72, 1-13.
IFN Oman Forum 2021. (2021, June 21). IFN Oman Forum 2021. Retrieved from islamicmarkets.com: https://islamicmarkets.com/events/ifn-oman-forum-2021
International Finance. (2020, September 21). How is Bahrain’s Islamic finance shaping up? Retrieved from https://internationalfinance.com/how-is-bahrains-islamic-finance-shaping-up/
Irfan, M. (2016). A Study of Islamic Stock Indices and Macroeconomic. International Journal of Economics and Management Engineering, 10(7), 2553-2561.
Irfan, M., Kassim, S., & Dhimmar, S. (2021). Impact of covid-19 on Islamic stock markets: An investigation using threshold volatility and event study models. International Journal of Islamic Economics and Finance (IJIEF), 4(1), 121-148.
Irfan, M., Sarea, A., & hossian, Z. (2022). The Threshold Effect of Covid19 on Shariah Indices:an Empirical Analysis of GCC Countries. JEDC, 50-62.
Irfan, M. (2021, Jan). Do Shariah Indices converge? Evidence from Gulf Cooperation Council countries. International Journal of Business Excellence, 23(2), 251-269.
Irfan, M., Kadry, S., Sharif , M., & Ullah Khan, H. (2023). Fintech Applications in Islamic Finance: AI, Machine Learning, and Blockchain Techniques. IGI Global. doi:10.4018/979-8-3693-1038-0
Islamic Banking Bulletin. (2020). Islamic Banking Bulletin. Pakistan: Islamic Banking Department, State Bank of Pakistan.
Jawadi, F., Jawadi, N., & Cheffou, A. I. (2015). Are Islamic Stock Markets E¢ cient? A Time-Series Analysis. Applied Economics, 47(16), 1686-1697.
Jena, J.R., Biswal, S.K., Shrivastava, A.K. et al. A bibliographic overview of financial engineering in the emerging financial market. Int J Syst Assur Eng Manag 14, 2048–2065(2023) https://doi.org/10.1007/s13198-023-02123-8
Jena, J. R., Panigrahi, R. R., & Shrivastava, A. K. (2023). A bibliometric analysis on financial engineering studies. International Journal of Financial Engineering, 10(02), 2250039.
Majid, M. A., Mohd, R., & Razal, A. N. (2007). Dynamic Financial Linkages among Selected OIC Countries. Journal of Economic Cooperation, 28(2), 25-56.
Manuswamy, D., & Swamy, V. (2020). The tipping point of financial development? – Evidence from OECD countries. International Economics and Economic Policy volume, 125–165.
Nurrachmi, R. (2018). Movements of Islamic Stock Indices in Selected OIC Countries. Jurnal Al-Muzara’ah, 6(2), 77-90.
Obaidullah, M. (2001). Ethics and Efficiency In Islamic Stock Market. International Journal of Islamic Financial Services, 3(2), 1-18.
Our World in Data. (2021, Jan 20). Coronavirus Pandemic (COVID-19). Retrieved from https://ourworldindata.org/: https://ourworldindata.org/coronavirus
Pew Research Center. (2021, Feb 20). Islam by country. Retrieved from Organisation of Islamic Cooperation: https://en.wikipedia.org/wiki/Islam_by_country
Razak, R. A., Ismail, N., & Aridi, N. A. (2016). Is Islamic Stock Market no different than Convetional Stock Market/ An Evideance form Malaysia. International Business Management, 10(17), 3914-3920.
Rejeb, A. B., & Arfaoui, M. (2017). Conventional and Islamic stock markets: What about financial performance? Journal of Emerging Economies & Islamic Research, 5(3), 45 – 62.
Research Department, Bangladesh Bank. (2020). Developments of Islamic Banking in Bangladesh. Bangladesh: Islamic Banking Cell, Research Department, Bangladesh Bank.
Research and Markets. (2020). Understanding the Impact of COVID-19 on the OIC Region. U.S.: Research and Markets.com's.
SESRIC. (2021, Feb 11). A Brief on the Organisation of Islamic Cooperation (OIC) and its Institutions. Retrieved from www.sesric.org/about-oic.php: https://www.sesric.org/about-oic.php
Umar, U. H., & Abubakar, M. (2021). Maximizing Zakat Revenues in the COVID-19 Period: The Need for Creating Zakat Accounting Standards in OIC Member Countries. International Journal of Zakat, 23-35.
WHO. (2021, March 6 ). WHO Coronavirus (COVID-19) Dashboard. Retrieved from covid19.who.int: https://covid19.who.int/
worldometers. (2021, March 06). Countries where COVID-19 has spread. Retrieved from https://www.worldometers.info/: https://www.worldometers.info/coronavirus/countries-where-coronavirus-has-spread/
www.oic-oci.org. (2020, 06 03). General Secretariat Holds Video Conference with OIC Universities to Review Impact of COVID-19 Pandemic. Retrieved from https://www.oic-oci.org/: https://www.oic-oci.org/topic/?t_id=23460&t_ref=14026&lan=en
Yahya, M., Muhammad, F., & Habidin, N. F. (2009). Export Market Ownership OIC Countries 1996-2005. The Journal of Muamulat and Islamic Finance Research, 6(1), 1-22.
Yuniarti, F. R. (2021, Jan 21). Indonesia could be Asia's next Islamic finance hub. Retrieved from https://www.thejakartapost.com/: https://www.thejakartapost.com/academia/2021/01/12/indonesia-could-be-asias-next-islamic-finance-hub.html
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Zakir Hossen Shaikh, Mohammad Irfan, Naji Mansour Nomran, Joji Abey
This work is licensed under a Creative Commons Attribution 4.0 International License.