Return and Volatility Spillover Between Islamic Stock Indices: An Application of Multivarite VAR-EGARCH on Developed and Emerging Markets

The aim of this paper is to demonstrate expected returns and volatility spillovers between the US and Islamic stock indices in emerging markets such as Indonesia, Malaysia and Turkey. The multivariate VAR (4) -EGARCH (1,1) model was used in the empirical application of the paper. The daily data of the Islamic indices prepared by MSCI (Morgan Stanley Capital International) from 14.06.2012 to 14.06.2017 were utilized in the study. Result of the study revealed that similar to the results of studies on conventional stock indices, asymmetric and multi-directional returns and volatility spillovers have been detected between developed and emerging countries based on Islamic indices. It was also found that there is no return spread from the emerging markets towards the Turkish Islamic index. In addition to Turkey is the country with the least volatility persistence among the emerging market