Islamic vs. Conventional Equity Indices and Investor Sentiments

Abstract

Purpose: This paper aims to empirically investigate the equity-sentiment relationship along with making a comparison between the Islamic equity indices with conventional ones. Methodology: To achieve the research objects, different models are applied including Ordinal Least square, Granger-Causality test, Johansen cointegration, and Autoregressive-distributed-lag (ADRL) model. Findings: Results show that investor sentiments explain both Islamic and conventional equity indices. Further, it could also be concluded from the results that Islamic-equity-indices don’t behave differently as compared to conventional-equity-indices. Originality: This study adds in literature, based on the empirical findings, that on the Islamic and conventional equity-sentiment relationship, Sharia screening criteria don’t play any significant role.

Keywords

• investor sentiments
• islamic-equity-indices
• conventional-equity-indices
• johansen co-integration
• and autoregressive-distributed-lag (adrl) model