Islamic Indices and Causality: A Myth or Truth
Islamic finance is a broad term applied to Shariah-compliant financial institutions and investments. Some of its unique features are its social responsibility, abhorrence of Riba (interest), and emphasis on morality (of areas under its ambit). It has been broadening its dominion since the late 1960s and is now a force to contend with. Yet Islamic finance represents unchartered territories with lots of potential for exploration. The Granger causality test is a statistical hypothesis test for determining causality between variables. It is used to test data empirically to find patterns of correlation. The relation and causality between the Shariah indices of Islamic countries is an area of exciting possibilities. A better understanding of this causal relationship will aid in accurate forecasting and prediction which will be highly beneficial for investors looking to enlarge their portfolios.
Keywords - Shariah, Granger causality, Shariah compliant indices
JEL Classification: C23, F37, N25