Handbook of Empirical Research on Islam and Economic Life
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Handbook of Empirical Research on Islam and Economic Life

Edited by M. Kabir Hassan

In Islamic jurisprudence, a comprehensive ethic has been formulated governing how business and commerce should be run, how accountability to God and the community is to be achieved, and how banking and finance is to be arranged. This Handbook examines how well these values are translated into actual performance. It explores whether those holding true to the system are hindered and put at a disadvantage or whether the Islamic institutions have been able to demonstrate that faith-based activities can be rewarding, both economically and spiritually.
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Chapter 28: A wavelet approach to timescale relationships among the Islamic and conventional stock markets and LIBOR

AbdelKader O. el Alaoui, Ginanjar Dewandaru, Obiyathulla Bacha and Mansur Masih

Abstract

This study attempts to investigate the relationships at different timescales between the Dow Jones Islamic European stock return and select continental/global Islamic and conventional stock returns and LIBOR. Both discrete and continuous wavelet techniques are used to unveil timescale relationships. The relationships between different stock indices (Dow Jones Islamic Asia, Dow Jones Islamic US, Dow Jones Conventional US and Dow Jones Islamic World, LIBOR) show evidence of multi-scale tendency. Moreover, Islamic stock returns appear to be strongly correlated with LIBOR, especially during its abrupt change. Finally, the Dow Jones Islamic stock indices appear to be impacted by the financial crisis in terms of contagion in volatility with implications for portfolio diversification. The results are plausible and intuitive and have strong policy implications.

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