Interest Rate Exposure and Stocks Returns during Global Financial Crisis: Evidence from Islamic and Conventional Markets

Majid Imdad Khan, Waheed Akhter, Usman Bhutta
Published Online: June 2020

This study aims to assess the impact of interest rate change on stocks returns and volatility of Islamic and Conventional stock market indices during global financial crisis for the period from 04 January, 2005 to 30 December, 2015.The stock indices of China (SSE), India (BSE) and Pakistan (PSE) as conventional, and Malaysia (DJIM), Indonesia (JKII) and Dow Jones World Islamic Index (DJWI) (Benchmark) as Islamic markets are employed into consideration, respectively. The volatility and conditional correlation are examined through GARCH (1, 1) and Multivariate-DCC GARCH, respectively. The results indicate that Islamic stock indices had low interest rate exposure and less stocks volatility than that of conventional stock indices during the global financial crisis period. This research has important implication for investors that they may consider Islamic stock markets as a safe haven during financial crises.


Stocks Volatility, Interest Rate Exposure, Global Financial Crisis, Dynamic Conditional Correlation, Dow Jones World Islamic Index.