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Examining the Islamic stock market efficiency: Evidence from nonlinear ESTAR unit root tests

Indonesian Capital Market Review

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Title Examining the Islamic stock market efficiency: Evidence from nonlinear ESTAR unit root tests
 
Creator Rahmat Heru Setianto; Department of Management, Universitas Airlangga, Indonesia
Turkhan Ali Abdul Manap; Islamic Research and Training Institute (IRTI), Islamic Development Bank, Jeddah, Kingdom of Saudi Arabia
 
Subject —
Islamic stock market, Efficient market hypothesis, Nonlinearity
 
Description This paper empirically examines the efficient market hypothesis (EMH) in the Islamic stock market namely Jakarta Islamic Index by emphasizing on the random walk behavior and nonlinearity. In the first step, we employ Brock et al. (1996) test to examine the presence of nonlinear behavior in Jakarta Islamic Index. The evidence of nonlinear behavior in the indices, motivate us to use nonlinear ESTAR unit root test procedure recently developed by Kapetanios et al. (2003) and Kruse (2011). The nonlinear unit root test procedure fail to rejects the null hypothesis of unit root for the indices, suggesting that Jakarta Islamic Index characterized by random walk process supporting the theory of efficient market hypothesis. In addition, Lumsdaine and Papel (LP) test identified significant structural breaks in the index series.
 
Publisher Management Research Center, Department of Management, Faculty of Economics and Business, U
 
Contributor —
 
Date 2015-04-22
 
Type Peer-reviewed Article
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Format application/pdf
 
Identifier http://journal.ui.ac.id/index.php/icmr/article/view/4355
 
Source Indonesian Capital Market Review; Vol 7, No 1 (2015): January 2015
 
Language en
 
Coverage Indonesia
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