Volatility of Malaysian conventional and Islamic indices: does financial crisis matter?

Abstract

Purpose

This study aims to investigate the volatility of conventional and Islamic indices and to explore the impact of the global financial crisis toward the volatility of both markets in Malaysia.

Design/methodology/approach

The data consist of financial times stock exchange group (FTSE) Bursa Malaysia Kuala Lumpur Composite Index and FTSE Bursa Malaysia Hijrah-Shari‘ah Index covering the period January 2008-October 2014. Generalized autoregressive conditional heteroskedasticity is used to find the volatility of the two markets and an ordinary least square model is then used to investigate the impact of the crisis toward the volatility of those markets.

Findings

Interestingly, the result shows that Islamic index is less volatile during the crisis compared to the conventional index. Furthermore, the crisis is proven to significantly affect the volatility of conventional index in the short run and Islamic index in the long run.

Originality/value

This study explores the volatility–financial crisis nexus, especially for the Islamic financial markets, which to the best of the author’s knowledge, is still lacking empirical research which may improve the understanding upon this issue.

Citation

Abduh, M. (2020), "Volatility of Malaysian conventional and Islamic indices: does financial crisis matter?", Journal of Islamic Accounting and Business Research, Vol. 11 No. 1, pp. 1-11. https://doi.org/10.1108/JIABR-07-2017-0103