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Does Islamic stock sensitivity to oil prices have economic significance?

Author

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  • Narayan, Paresh Kumar
  • Phan, Dinh Hoang Bach
  • Sharma, Susan Sunila
Abstract
This paper uses an extensive new dataset of 2178 Islamic stocks with historical monthly data (1986–2014) and examines their sensitivity to oil price changes. We find that only around 32% of these stocks react statistically significantly to oil prices, dispelling the common notion that oil prices affect the stock market homogeneously. We show that trading on oil price sensitivity offers investors annualized profits in the range of 5.8–13.6%. These results pass multiple robustness tests.

Suggested Citation

  • Narayan, Paresh Kumar & Phan, Dinh Hoang Bach & Sharma, Susan Sunila, 2019. "Does Islamic stock sensitivity to oil prices have economic significance?," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 497-512.
    • Handle: RePEc:eee:pacfin:v:53:y:2019:i:c:p:497-512
    DOI: 10.1016/j.pacfin.2018.04.003
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    References listed on IDEAS

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