Return-Volatility Spillovers between Malaysian Islamic and Conventional Equity Markets

This paper explores the issue of return-volatility spillovers in a bivariate context between Malaysian Islamic equity market, Dow-Jones Islamic Market, Malaysian Conventional equity market and overall US stock market creating four different pairs. GARCH-M models are estimated using daily data from January 3, 2007 through June 30, 2019. In all four cases, the is evidence of weak return and volatility spillovers from one market to another market. They imply relative tranquility between markets, as considered at a time. This implies slow co-movements between markets in terms of both mean-returns and conditional variances. So, Islamic equity markets do not seem distinct from conventional equity markets from investors’ perspectives. Investors may thus prefer to invest in both Islamic and conventional equities for portfolio diversification