Abstract
This study aims to examine the impact of COVID-19 towards the random walk behavior of the emerging Islamic stock market over the period of October 9, 2019 to August 11, 2020. The analysis of the study is conducted by using two Islamic stock indices, namely FTSE Bursa Malaysia Hijrah Shariah Index and the FTSE Bursa Malaysia EMAS Shariah Index. The unit root tests and variance ratio tests are employed to examine the random walk hypothesis. The results of the study showed that (i) Islamic stock indices did not follow random walk process before and during COVID-19 as well as for the entire periods, thus suggesting that the emerging Islamic stock market is not weak form efficient, (ii) returns for Islamic stock indices were much higher and volatile during the period of COVID-19. The findings of this study have important implications. First, the stationarity of the return series suggest that it is possible to gain excess return, thus offer investors opportunity to diversify investment risk. Second, the findings of inefficient weak form Islamic stock indices suggest that stock market regulators may undertake policy to develop stock market and to improve information dissemination in order to promote a more efficient resource allocation.
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Article Details
- Year: 2023
- Volume: 44
- Issue: 1
- Pages: 1 - 24
- Accepted: 14.03.2023
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DOI:
https://doi.org/10.5281/zenodo.16881966 -
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How to Cite?
Bee Hoong Tay (2023). Random Walk Hypothesis and COVID-19: A Study on the Emerging Islamic Stock Index. Journal of Economic Cooperation and Development, 44(1), 1-24. https://doi.org/10.5281/zenodo.16881966
