Sources of Fluctuations in Islamic, U.S., EU, and Asia Equity Markets: The Roles of Economic Uncertainty, Interest Rates, and Stock Indexes. Issue 5 (3rd May 2016)

• Record Type: Journal Article
• Authors: Hammoudeh, Shawkat; Kim, Won Joong; Sarafrazi, Soodabeh
• Is Part Of: Emerging markets finance & trade. Volume 52:Issue 5(2016)
• Page Start: 1195
• Page End: 1209
• Publication Date: 2016-05-03
• Subjects: global Islamic stock markets -- SVEC model -- synchronization -- economic uncertainty; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2014.998561
• Languages: English
• ISSNs: 1540-496X

Abstract

ABSTRACT: This article analyzes the economic and financial sources of fluctuations among the U.S. federal funds rates, the U.S. economic policy uncertainty, and the indices of the U.S., European, Asian, and Islamic stock markets. The impulse response analysis shows that the U.S. economic policy uncertainty shocks have significant and negative effects unanimously on the U.S., European, Asian, and Islamic stock markets. A contractionary monetary policy shock, in terms of a higher federal funds rate, has also a statistically significant and negative effect on all of the stock markets. The variance decomposition results indicate that the Islamic stock index is mainly affected by the U.S. stock index shock, thus negating its dichotomy hypothesis. The U.S. economic uncertainty shock explains an important portion of fluctuations for all four stock indices. The degree of synchronization between the EU stock market and other markets has weakened after the U.S. financial crisis.