Analysis of the Interaction of Participation 30 Index with Dow Jones Islamic Markets Index and CBOE Volatility Index

Abstract

This study aims to examine the dynamic relationship between Islamic markets and global financial risk factors using the Dow Jones Islamic Markets World Index (DJIM), Participation 30 Index (KATLM 30), and the CBOE Volatility Index (VIX). The analysis applies the DCC-GARCH model to the daily return series from January 3, 2014, to December 31, 2021. The results reveal a negative interaction between VIX and the Islamic indices throughout the study period. Furthermore, the dynamic correlation coefficient between VIX and DJIM (-0.755040) was higher than that between VIX and KATLM 30 (-0.180328), while the dynamic correlation coefficient between KATLM 30 and DJIM (0.26989) was weak and positive. These findings suggest that KATLM 30 is less affected by global risks, exhibits less integration into the global financial system, and serves as a better diversifier for international investment portfolios than DJIM. This study provides valuable insights for investors and portfolio managers and contributes to enhancing portfolio management strategies.