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Conventional vs. Shariah stock indices: Volatility, Financial Contagion, Interest Rate Risk and Gold as Safe Haven

Thesis title in Czech:	Conventional vs. Shariah stock indices: Volatility, Financial Contagion, Interest Rate Risk and Gold as Safe Haven
Thesis title in English:	Conventional vs. Shariah stock indices: Volatility, Financial Contagion, Interest Rate Risk and Gold as Safe Haven
Key words:	Islamic Finance, Stock markets, Shariah Indices, Global Financial Crisis , Volatility, Financial Contagion, GARCH, Correlation
English key words:	Islamic Finance, Stock markets, Shariah Indices, Global Financial Crisis , Volatility, Financial Contagion, GARCH, Correlation
Academic year of topic announcement:	2015/2016
Thesis type:	diploma thesis
Thesis language:	angličtina
Department:	Institute of Economic Studies (23-IES)
Supervisor:	prof. Ing. Evžen Kočenda, M.A., Ph.D., DSc.
Author:	hidden - assigned by the advisor
Date of registration:	28.05.2016
Date of assignment:	28.05.2016
Date and time of defence:	20.06.2018 08:30
Venue of defence:	Opletalova - Opletalova 26, O105, Opletalova - místn. č. 105
Date of electronic submission:	08.05.2018
Date of proceeded defence:	20.06.2018
Opponents:	PhDr. Jaromír Baxa, Ph.D.



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Preliminary scope of work

The thesis aims at the comparison of volatility between conventional stock indices and their Shariah counterparts. We study the time-varying volatility and correlation of both categories using GARCH models, during Global Financial Crisis and afterwards, from January 2008 to March 2017. We analyze the Global stock indices drilling down into their Developed and Emerging market segments, and study the U.S. market; considering U.S. as the origin of the crisis. Extending traditional approach, we study difference of time-varying volatility between conventional and Shariah indices, and thoroughly study its dynamic development during the study period. Employing DCC-GARCH, we investigate the financial contagion within markets and find Shariah indices to be significantly affected by it. We find Shariah stocks to be less risky and a diversification opportunity during crisis, but based on market; unlike other markets, Shariah stocks are more volatile in Emerging markets. We also examine correlations of stock indices with interest rates and analyze the role of gold as a safe-haven for Shariah investors. We observe Shariah indices to be having correlation with interest rates similar to that of conventional indices, hence exposed to interest rate risk. Finally, we find that gold is less correlated to Shariah indices implying risk-mitigation opportunity.

Preliminary scope of work in English