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Title: | Co-movement and information transmission between conventional and Islamic equities in Sri Lanka |
Authors: | Mohamed Riyath, Mohamed Ismail Hussainey, Khaled |
Keywords: | Coherence Cross-Correlation DCC-GARCH Islamic Stock Sri Lanka Wavelet Scalograms |
Issue Date: | 4-Mar-2025 |
Publisher: | Emerald Publishing Limited |
Citation: | Mohamed Riyath, M.I. and Hussainey, K. (2025), "Co-movement and information transmission between conventional and Islamic equities in Sri Lanka", Review of Accounting and Finance, Vol. ahead-of-print No. ahead-of-print. |
Abstract: | This study investigates the co-movement and information transmission between conventional and Islamic equity indices in Sri Lanka. Methodology: This study uses daily data of All Share Price Index and Dow Jones Islamic Market Sri Lanka Index from 2013 to 2023 for conventional and Islamic proxies. Descriptive statistics, cross-correlation, DCC-GARCH, and wavelet analysis were used for the investigation. Findings: Analyses reveal synchronous correlation yet lead-lag dynamics between the indices. The Islamic index has lower volatility, clustering, and persistence than the conventional index. Localized volatility patches and scale-dependent synchronicity suggest diversification opportunities to optimize risk-adjusted returns. Originality: This study uniquely integrates DCC-GARCH and wavelet analysis to examine the dynamic, time-varying relationships between Islamic and conventional equity markets in Sri Lanka’s dual financial system. This approach helps embrace both short-run changes and long-run movements to gain in-depth co-movement and spillovers, as well as potential diversification gains within an emerging financial market. Implications: The insights from this study are important for investors to optimize diversified portfolios by exploiting time-varying correlations. The identified lead-lag dynamics, bidirectional information flows, and scale-dependent synchronization between the indices enable both investors to predict market movements for effective asset allocation and regulators to monitor market efficiency, stability, and implement shock mitigation measures. |
URI: | https://doi.org/10.1108/RAF-10-2023-0357 http://ir.lib.seu.ac.lk/handle/123456789/7346 |
ISSN: | 1475-7702 |
Appears in Collections: | Research Articles |
Files in This Item:
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Co-Movement and Information.pdf | 26.26 kB | Adobe PDF | View/Open |
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