GRM 2010 GRM 2011

Abstract Details

Family Name:
Ouatik El ALAOUI
First Name:
Title of Paper:
Wavelet Analysis of Stock Price Behavior - Evidence from Dow Jones Islamic GCC Stock Index Returns -
Paper Proposal Text :
The current oil low price prevailing during the last years may have a big effect on the investments in financial markets. Turbulences in Oil prices may compel investors to sell shares and corporate bonds or Sukuk which could trigger broader turmoil across international markets with a contagion effect on GCC market. This paper investigates the impact of the performance of oil price index and its co-movement with major Sukuk (GCC Sukuk , S&P MENA, Dow Jones Global) and Islamic GCC indices. We also examine the impact of the LIBOR (Overnight and forward) on the GCC Islamic Sukuk returns.

We perform a multi-timescale analysis of the return of oil, Sukuk and GCC equity indices using wavelet decompositions. In addition, we analyze lead-lag correlations between return and volatility indices time series daily and weekly indices data by customizing through variation of sigma using discrete and continuous wavelet transforms. Our results demonstrate the multi-scale tendency of the average β coefficients in the GCC stock Index returns. Our findings are in line with the existence of multi-investment horizons due to multi-trading strategies pursued by investors. This multi-horizon nature and its impact on the risk related to GCC equity markets are motivated by the dynamics of oil returns’ volatility and those markets’ characteristics.

Hence, the oil return index is found to be dynamically correlated with Sukuk and different indices. Its volatility is leading most of the GCC indices. Surprisingly, in the analysed period, there is virtually quasi no correlation between oil futures with the various Sukuk in terms of returns and volatility. In terms of LIBOR causality, it is concluded that both values of LIBOR (overnight and forward one month) have a significant impact on the GCC Sukuk and equity return indices. But all depends on the periods of time based on the coefficients for different time scales. Another point is especially important in light of a sustained low price of oil, the GCC markets are perceived to be more impacted in the long run, and could present an opportunity for international diversification. Consequently, regarding oil and Sukuk volatility structures, investors have to adapt their investment strategies during shocks’ period including the period of global financial crisis.

Key Words:
Oil prices, Sukuk, GCC Dow Jones Islamic stock index return, Shock transmission, Discrete and continuous Wavelet Transform, LIBOR, Financial integration, resiliency of Islamic equity market, risk and volatility.