Cross-country evidence of Islamic portfolio diversification: are there opportunities in Saudi Arabia?

2019 ◽  
Vol 45 (1) ◽  
pp. 36-53 ◽  
Author(s):  
Md Hakim Ali ◽  
Md Akther Uddin ◽  
Mohammad Ashraful Ferdous Chowdhury ◽  
Mansur Masih
Keyword(s):  
Saudi Arabia ◽  
Wavelet Transforms ◽  
Saudi Arabian ◽  
Portfolio Diversification ◽  
Discrete Wavelet ◽  
Policy Makers ◽  
Content Type ◽  
International Portfolio Diversification ◽  
Trading Partners ◽  
Cross Country

Purpose On the backdrop of growing importance of Shariah compliant equity markets, the purpose of this paper is to study cross-country portfolio diversification benefits for investors with major trading partners of Saudi Arabia, namely, USA, China, Japan, Germany and India, who have already invested or tend to invest in Saudi Arabian stock market. Design/methodology/approach The authors have investigated time invariant, dynamic correlations at different investments horizons of the investors among Islamic asset classes by applying relevant econometric techniques like multivariate generalized autoregressive conditional heteroscedastic –DCC and continuous wavelet transforms. For robustness, this study also applied maximal overlap discrete wavelet transform. Findings The findings tend to indicate that the Saudi Arabian investors have portfolio diversification benefits with all major trading partners in the short-term investment horizon. Interestingly, Saudi Arabian market has the least portfolio diversification benefits with the Chinese market. However, in the long run, all markets are correlated, yielding minimum portfolio diversification benefits and most importantly Saudi Arabian investors have portfolio diversification benefits with the Indian Islamic equity market in almost all investment horizons. The findings are highly consistent across different econometric technique estimations. Research limitations/implications The authors are only considering five major trading partners of Saudi Arabia. Also, the authors are using S&P and FTSE shari’ah index. Moreover, the time period of the study is constrained by the availability of shari’ah indices. Econometric limitations are also well documented in the literature. Practical implications The results could be beneficial for the investors, portfolio managers, hedge fund managers and institutional investors and also could be useful for the policy makers in their policy-making decisions. Originality/value Only very few studies have looked into the benefits of international portfolio diversification from the perspective of local investors as well as the portfolio diversification benefits with the major trading partners of Saudi Arabia. One of the novelties of the method is to make the stock investors, practitioners and policy makers aware of the portfolio diversification benefits available at different time scales such as 4, 8, 16, 32, 64 and 256 trading days as investment holding periods to unveil the true dynamics of co-movement between those different assets.

scholarly journals Impact of Brexit on Islamic stock markets: employing MGARCH-DCC and wavelet correlation analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Burak Çıkıryel ◽  
Hakan Aslan ◽  
Mücahit Özdemir
Keyword(s):  
Sri Lanka ◽  
Stock Market ◽  
Stock Markets ◽  
Financial Sector ◽  
Portfolio Diversification ◽  
Stock Index ◽  
Discrete Wavelet ◽  
Content Type ◽  
International Portfolio Diversification ◽  
Diversification Strategies

Purpose This paper aims to study the co-movement dynamics of Islamic equity returns to explain international portfolio diversification opportunities for investors having a heterogeneous stock holding period in light of Brexit. Design/methodology/approach The authors use the following three recent methodologies: the multivariate generalised autoregressive conditional heteroskedastic-dynamic conditional correlations, continuous wavelet transforms and maximum overlap discrete wavelet transform. Dow Jones Islamic country-based indexes are used from 2 September 2013 to 31 December 2019. Findings There is a high correlation between the United Kingdom (UK) Islamic stock market return with the Canadian, USA, Malaysian and Indian implying lesser diversification benefits for the investors. However, the results tend to indicate that UK Islamic stock market investors who have allocated their investment in Sri Lanka, Kuwait, Japan and Turkey have enjoyed diversification benefits. Besides, there is a declining correlation between UK Islamic stock markets and other selected markets aftermath of Brexit. Turkey seems the most volatile stock over the period, appealing to risk-lover investors to gain from price changes. When the shock occurs in the financial sector, the volatility is mean-reverting faster than other markets in Sri Lanka. On the other hand, Malaysia appears to have the least volatility implying a stable financial sector. Research limitations/implications The results tend to shed light on effective portfolio diversification benefits in light of the recent shock (Brexit) between the UK Islamic stock index and other selected indexes that vary from country to country depending on investment horizons. This critically confirms the significance of heterogeneity in investment horizons and provides significant inferences for portfolio diversification strategies. Originality/value To the best of the authors’ knowledge, this study is the first study investigating the Brexit effect on Islamic stocks, guiding Shariah sensitive investors in their diversification strategies, providing information to investors to consider the implications of this incident on Islamic stocks for future shocks.

Implementation of Lean Six Sigma in Saudi Arabian organisations

2017 ◽  
Vol 34 (4) ◽  
pp. 508-529 ◽  
Author(s):  
Saja Ahmed Albliwi ◽  
Jiju Antony ◽  
Norin Arshed ◽  
Abhijeet Ghadge
Keyword(s):  
Saudi Arabia ◽  
Six Sigma ◽  
Best Practice ◽  
Online Survey ◽  
Saudi Arabian ◽  
Lean Six Sigma ◽  
Current Status ◽  
Future Research ◽  
Structured Interviews ◽  
Content Type

Purpose Although the popularity of the Lean Six Sigma (LSS) methodology has illustrated many benefits over the years for those organisations who have implemented it, this strategy has received less attention in developing countries. The purpose of this paper is to critically assess the current status of LSS implementation in Saudi Arabian organisations. Design/methodology/approach This research is based on a descriptive survey questionnaire which has been derived from two systematic literature reviews. The survey was distributed to 400 organisations in Saudi Arabia using Qualtrics online software. In total, 146 responses were received where 102 responses were completed and analysed. Findings The findings of the survey highlighted that the implementation of LSS is still in the early stages in organisations within Saudi Arabia. This was clearly shown by many factors such as years of deploying LSS, LSS infrastructure, level of awareness of LSS, impact of LSS on business functions and so on. Research limitations/implications The primary limitation of this study is that data has been collected from an online survey and therefore no deeper insights could have been captured from the survey. This calls for future research to be undertaken by executing semi-structured interviews in selective organisations within Saudi Arabia. Originality/value This paper contributes to the current status of LSS in Saudi Arabian organisations. It also gives recommendations to guide the future of LSS in Saudi organisations by comparing LSS literature with best practice.

scholarly journals Audit committees in financial institutions in Saudi Arabia: a dichotomy of perceptions of functional independence and the reporting of financial crime

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Reem Ali Almakhfor ◽  
Simon D. Norton
Keyword(s):  
Saudi Arabia ◽  
Financial Institutions ◽  
Saudi Arabian ◽  
Functional Independence ◽  
Audit Committees ◽  
Financial Crime ◽  
Regulatory Body ◽  
Content Type ◽  
Behavioural Factors ◽  
Using Data

Purpose Audit committees (ACs) have an important role to play in banks in Saudi Arabia in detecting and reporting weaknesses which may make financial crime possible. The Saudi Arabian Corporate Governance Code of 2016 comprises recommendations for ensuring the effectiveness of these committees, but cultural and behavioural factors can constitute impediments. This paper aims to explore these factors and makes recommendations. Design/methodology/approach The methodology is qualitative, using data derived from responses to a questionnaire administered to 180 current and former members of internal and external audit teams of Saudi Arabian banks. Findings ACs in Saudi financial institutions enjoy a high degree of functional independence of boards. Boards tend to regard ACs as part of the organisation: in contrast, AC members perceive their first duty as being owed to stakeholders. Disagreements between boards and ACs regarding disclosure of findings of systemic weaknesses which facilitate money laundering (ML) are made publicly available; this engenders transparency and avoidance of collusion. Professional qualifications and experience of AC members have improved substantially in recent years, equipping them to better discharge statutory duties regarding the detection and reporting of suspected ML. Research limitations/implications The regulatory body, the Saudi Arabian Markets Authority, should be diligent in ensuring the presence of non-executive directors in sufficient numbers to counterbalance influence by boards. Disagreements between boards and ACs regarding internal systemic changes to prevent ML and other financial crimes should be formally recorded in minutes and made public as a matter of record. Originality/value Questionnaire responses by past and present members of ACs are unique and contribute to the literature.

scholarly journals Revisiting the corporate image through service quality and relationship marketing: an empirical evidence from Malaysian and Saudi Arabian Takaful customers

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohsin Abdur Rehman ◽  
Sadaf Khan ◽  
Ismah Osman ◽  
Khurram Aziz ◽  
Ghazal Shams
Keyword(s):  
Saudi Arabia ◽  
Service Quality ◽  
Relationship Marketing ◽  
Customer Loyalty ◽  
Corporate Reputation ◽  
Saudi Arabian ◽  
Corporate Image ◽  
Ethical Behaviour ◽  
Content Type ◽  
The Relationship

Purpose This study aims to test a proposed model based on a combination of the relationship marketing and service quality dimensions as predictors of corporate image and customer loyalty via corporate reputation in the Takaful context. More importantly, this study compares the Takaful operators’ services with the perceived service quality and the relationship marketing from the Malaysian and Saudi Arabian customers’ viewpoint. Design/methodology/approach A survey-based study was conducted through a questionnaire, and the data was collected from Takaful customers (362 Saudi Arabian and 350 Malaysian customers) through an online survey. Structural equation modelling is used to test the proposed model. Besides, the perception of Takaful customers between Saudi Arabia and Malaysia is compared through a multi-group analysis. Findings The results from the Malaysian context reveal that positive perceptions of service quality PAKSERV dimensions (personalization, reliability and tangibility) and positive perceptions of relationship marketing dimensions (Islamic ethical behaviour and structural bonds) have a significant influence on the corporate image. Alternatively, in the Saudi Arabian context, results have shown that the positive perceptions of service quality PAKSERV dimensions (assurance and reliability) of service quality and the positive perceptions of the relationship marketing dimensions (Islamic ethical behaviour, structural bonds and financial bonds) have a significant influence on the corporate image. The differences in both countries’ results can also enhance the corporate image on corporate reputation, merely in Malaysia. By contrast, corporate reputation is deemed a significant predictor of customer loyalty, represented as valid for both contexts. Research limitations/implications The proposed research model tested in Takaful Malaysian and Saudi Arabian can be replicated in other contexts – in terms of country and industry. Moreover, the current study reveals the crucial role of corporate image in forming corporate reputation. Future research could be focussed on the importance of other emotional or affective variables that may be involved in determining corporate reputation. Finally, future studies can be carried with another cultural perspective to have more diversified socio-economic implications. Practical implications It is suggested that Takaful operators from both Malaysia and Saudi Arabia need to put maximum effort towards customer loyalty by bringing both the dimensions of service quality and the relationship marketing in compliance with the principles of Islamic business transaction. The findings of the specific dimensions of service quality and relationship marketing will contribute to customers’ perceptions of corporate image and reputation in the Takaful industry. Originality/value The present study tested a blended facet of customer’s overall experience through service quality (PAKSERV) and customer service provider connectivity (relationship marketing) to predict the corporate image of the highly growing financial marketplace (Takaful). Contextually, this study contributes to delineating the factors (corporate reputation) affecting customer loyalty rather than a customer satisfaction tradition. Significantly, Saudi Arabia and Malaysia were chosen for this study, as they are currently the two fast-growing markets for Islamic financial services, especially with regards to the Takaful products and offerings.

scholarly journals Global Portfolio Diversification and Equity Market: Evidence from Trading Partners of Pakistan

2018 ◽  
Vol 6 (1) ◽  
pp. 20-34
Author(s):  
Muhammad Husnain ◽  
◽  
Ume Habiba ◽  
Shahnaz Arifullah ◽  
Izhar Muhammad ◽  
...  
Keyword(s):  
Portfolio Management ◽  
Equity Markets ◽  
Equity Market ◽  
Portfolio Diversification ◽  
Weekly Basis ◽  
Policy Makers ◽  
Trading Partners ◽  
Portfolio Managers ◽  
Asset Classes

The influential work of Markowitz (1952, 1959) provides foundation to modern investment philosophy. Investors can reap the potential benefit of portfolio diversification only if the involved asset classes in investment basket are not perfectly correlated. Objective of this study is to empirically investigate the cointegration among equity market of Pakistan and its major trading partners (China, France, Germany, Hong Kong, Japan, Korea, Malaysia, UK and USA). Sample period of study starts from 2004 to 2015, on weekly basis. Bivariate cointegration (Johansen, 1991, 1995) analysis reveals that equity market of Pakistan has no long term relationship with any of the equity markets of its major trading partners. Therefore, we recommend to potential investors, portfolio managers, and policy makers that prospective benefit of portfolio diversification can be achieved by investing in the equity markets of major trading partners of Pakistan. Further, they should be vigilant regarding the co-movement among equity markets during portfolio management decisions.

Return and volatility spillovers between Bitcoin and other asset classes in Turkey

2019 ◽  
Vol 14 (3) ◽  
pp. 209-220 ◽  
Author(s):  
Gulin Vardar ◽  
Berna Aydogan
Keyword(s):  
Spillover Effects ◽  
Portfolio Diversification ◽  
Volatility Spillover ◽  
Policy Makers ◽  
Content Type ◽  
Empirical Results ◽  
Volatility Spillovers ◽  
Regulatory Bodies ◽  
Asset Classes ◽  
Econometric Technique

Purpose With a substantial return and volatility characteristic of Bitcoin, which may be seen as a new category of investment assets, better understanding of the nature of return and volatility spillover can help investors and regulators in achieving the potential goal from portfolio diversification. The paper aims to discuss these issues. Design/methodology/approach This paper explores the return and volatility transmission between the Bitcoin, as the largest cryptocurrency, and other traditional asset classes, namely stock, bond and currencies from the standpoint of Turkey over the period July, 2010–June, 2018 using the newly developed multivariate econometric technique, VAR–GARCH, in mean framework with the BEKK representation. Findings The empirical results reveal the existence of the positive unilateral return spillovers from the bond market to Bitcoin market. Regarding the results of shock and volatility spillovers, there exists strong evidence of bidirectional cross-market shock and volatility spillover effects between Bitcoin and all other financial asset classes, except US Dollar exchange rate. Originality/value The important extention is the adoption of a newly developed multivariate econometric technique, VAR–GARCH, in mean framework with the BEKK representation, proposed by Engle and Kroner (1995), which is employed for the first time specifically to examine the extent of integration in terms of volatility and return between Bitcoin and key asset classes. Second, Bitcoin has experienced a rapid growth since around a decade and a number of investors are showing interest in its potential as an integrative part of portfolio diversification. The information provided by empirical results gives empirical bases from which to address topics concerning hedging purposes and optimal portfolio allocation. It is also increasingly important to analyze the current behavior of Bitcoin in relation to other assets to provide policy makers and regulatory bodies with guidance on the role of the Bitcoin as an investment asset in Turkey. Thus, this is the first serious attempt at exploring the potential for Bitcoin to offer diversification opportunities in the context of Turkey.

Implementing IFRS in Saudi Arabia: evidence from publicly traded companies

2020 ◽  
Vol 28 (2) ◽  
pp. 243-273 ◽  
Author(s):  
Mohammad Nurunnabi ◽  
Eva K. Jermakowicz ◽  
Han Donker
Keyword(s):  
Saudi Arabia ◽  
Financial Reporting ◽  
Critical Role ◽  
Saudi Arabian ◽  
Content Type ◽  
Audit Firm ◽  
Big 4 ◽  
Expected Benefits ◽  
The Impact ◽  
Ifrs Implementation

Purpose The Saudi Organization for Certified Public Accountants (SOCPA) requires that International Financial Reporting Standards (IFRS), as endorsed in Saudi Arabia, be used by all listed and unlisted companies. This study aims to provide insight into IFRS implementation problems, based on a survey sent to Saudi Arabian companies listed on Tadawul, the Saudi stock market (i.e. financial hub in the Middle East). Design/methodology/approach The survey focused on the impact that IFRS conversion has had on companies, their accounting and their finance strategies. The benefits and challenges of the adoption of IFRS are analyzed, including matters pertaining to the level of understanding and experience with IFRS, perceptions about the quality of IFRS and the impact of adoption of IFRS on consolidated equity and net income. Findings The survey had a response rate of 72 per cent. The results indicate a majority of respondents support conversion to IFRS as it results in higher quality financial reporting; the most important expected benefits of adopting IFRS include greater reporting transparency and improved comparability with other businesses; other expected benefits include harmonization of internal and external reporting, and increased cross-border investment opportunities; the IFRS process is costly and ties up resources because of its complexity and training needed and companies expect increased volatility in reported financial results that will impact share option plans and/or other incentive plans tied to profits. However, the authors find strong support among preparers of the financial statements for IFRS, as evidenced by higher agreement among respondents to the survey on the benefits of adopting IFRS, rather than on the costs of its adoption. Furthermore, the analysis shows that the likelihood of Saudi Arabian firms that are in favor of adopting IFRS decreases if the audit firm is one of the Big 4. The reason for this negative relationship could be that the cost of transition toward IFRS will be high. Therefore, Saudi Arabian firms will not favor a transition toward IFRS when their audit firm belongs to the Big 4. Most difficult to implement IFRS, as listed by respondents, include those on financial instruments, revenue, leases and employee benefits. Originality/value The authors show how economic and environmental factors play a critical role in the IFRS implementation process. This study should be important to all countries worldwide that are in the process of adopting IFRS.

From east to west and back again: the effects of reverse culture shock on female Saudi Arabian university students studying abroad

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Carmen Winkel ◽  
Laura Strachan ◽  
Siddiqua Aamir
Keyword(s):  
Saudi Arabia ◽  
University Students ◽  
Culture Shock ◽  
Saudi Arabian ◽  
Extended Period ◽  
Government Support ◽  
Data Set ◽  
Reverse Culture Shock ◽  
Content Type ◽  
Returning Home

Purpose The purpose of this study is to explore the experiences of Saudi Arabian university students returning home after having spent time away studying internationally. The investigation focused exclusively on female students who for diverse reasons were unable to complete their studies abroad. Design/methodology/approach A thematic analysis was applied to analyze the seven in-depth interviews conducted by the authors. By using an open coding method analytic patterns across the entire data set were identified and then analyzed. Findings The findings suggest that the students experienced reverse culture shock reintegrating and assimilating into their former lives in the Kingdom of Saudi Arabia and its conservative culture. This was especially surprising considering not one of the participants experienced culture shock when they first traveled to their host country – the USA, Canada or England. Research limitations/implications The study is limited to a small group of seven female undergraduates who are comparatively well educated and come from a middle and upper socioeconomic demographic. As a result, without additional research, the findings cannot be extended to groups outside of this demographic. Practical implications Students who have studied abroad need improved academic and social support networks when they return home, according to the findings. The authors want to raise awareness about the difficulties that students face upon their return. Teachers, counselors, and advisors need to be on the lookout for the symptomatology associated with these types of problems. Social implications Female Saudi students returning home after an extended period of study abroad face a variety of problems. They must fit into a restrictive, partriarchal culture in which they are not legally equal to men. Originality/value To date, there are no studies that shed light on reverse culture shock for students who returned to Saudi Arabia without a degree. Due to the large number of Saudi scholarship holders who study in English-speaking countries with government support, the study is the first attempt in this direction.

Co-movement dynamics of sustainability indices: investigating the diversification opportunities through FTSE4Good index family and Borsa Istanbul sustainability index

2019 ◽  
Vol 16 (8) ◽  
pp. 1475-1487 ◽  
Author(s):  
Ibrahim Yasar Gok ◽  
Serhat Duranay ◽  
Hande Uzunoglu Unlu
Keyword(s):  
Portfolio Diversification ◽  
Stock Index ◽  
Socially Responsible ◽  
Content Type ◽  
Sustainability Index ◽  
International Portfolio Diversification ◽  
Socially Responsible Investments ◽  
International Portfolio ◽  
Index Family ◽  
Sustainability Indices

Purpose This study aims to investigate the international portfolio diversification opportunities provided by Turkish sustainable firms to international socially responsible investors. Design/methodology/approach The Borsa Istanbul Sustainability Index (XUSRD) and FTSE4Good index family daily data for the period of 11/04/2014-12/31/2017 is used and the DCC-GARCH model is applied to explore the dynamic correlation linkages. Findings The results indicate that co-movements between XUSRD and FTSE4Good indices are time-varying and generally display a low level. While the highest average conditional correlation value was observed between XUSRD and Developed 100 index, the lowest one was between XUSRD and FTSE4Good Japan index. Research limitations/implications Since XUSRD was launched on 11/04/2014, there is no available data before this date. Additionally, because the study includes indices from the USA to Japan, it is not possible to use high-frequency stock index data due to lack of overlapping time series. Practical implications This study contributes implications for investors of sustainability assets to improve their diversification. Especially, it is identified that the diversification opportunities provided by Turkish sustainable firms are largely possible for Japanese and Australian socially responsible investors. Additionally, this research has contributions for policymakers. Originality/value Although the conventional stock market indices are widely examined in terms of their time-variant relationship, there are only a few studies in the literature focusing on sustainability indices. Socially responsible investments (SRI) are emerging as a new trend, and these investments are also in need of international portfolio diversification. Therefore, this study is expected to fill a gap in the SRI literature.

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