Dynamic Volatility persistence of Islamic Equity Mutual Fund of Islamic Funds Markets
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Abstract
This study examines the volatility of returns of equity funds in developing Islamic markets. The study aims to determine whether and to what extent equity fund returns volatility structure has persistent characteristics and asymmetries in Saudi equities, Malaysian equities, and Pakistani equity funds from 2010 to 2022. To examine volatility dynamics, this study uses different GARCH variants for symmetric and asymmetric volatility behaviours. A News Impact Curve is used in this report to analyze the asymmetries in the volatility of investment returns and the relative value of equity funds markets across the various countries included in the study. Based on the study's results, daily returns exhibit persistent volatility. Still, weekly and monthly returns are unsuitable for the GARCH family, as the ARCH effect could not be found in less frequent data and does not appear to have persistent volatility. Daily returns also show asymmetries, indicating that investors' perceptions and actions are affected directly by news arriving consistently in the market. In contrast, the spectacle recedes with extended periods, suggesting that the emerging Islamic market can behave semi-strongly during prolonged periods. These findings impact investing in assets, pricing instruments, estimating the cost of capital, and optimizing portfolios.
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References
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