Abstract:
We compare a nonlinear (time-varying) cointegration test with the
standard cointegration test in studying the long-run relationship of the
Dow Jones Islamic finance index with three other conventional global
equity market indices. Our results show that there is a long-run
nonlinear cointegrating relationship between the Dow Jones Islamic
stock market index and other conventional stock market indices,
which is not picked up by the linear cointegration test. Thus,
Islamic markets seem to offer little, if any, long-run diversification
to international investors.
