Portfolio Returns of Islamic Indices and Stock Prices in GCC Countries: Empirical Evidence From the ARDL Model

Abstract

This study aimed to analyze four portfolio returns of Islamic indices to determine the potential of attracting investments in the Islamic Stock Price Index of the six Gulf Cooperation Council (GCC) countries. Monthly data were collected from S&P Dow Jones Indices LLC reports covering the period from December 31, 2010 to December 31, 2019. The study applied the autoregressive distributed lag (ARDL) method for estimation. The findings show that the S&P GCC Composite Shariah, the S&P GCC Composite Shariah Dividend, and the S&P Shariah Domestic Total Return Index are positively related in the long run to the Islamic Stock Price Index but S&P GCC Investable Shariah is negatively related to the Islamic Stock Price Index. The error correction model (ECM) results for the short-run ARDL model indicate that the S&P GCC Composite Shariah and the S&P GCC Investable Shariah are positively related to the Islamic Stock Price Index but S&P Shariah Domestic Total Return Index is negatively related to the Islamic Stock Price Index. The main conclusion is that positive growth in the price of Islamic stocks depends on diversifying the Islamic investment portfolio to hedge against unexpected risks.