Publication: Investigating the Presence of Long Memory in DJIM Index Yield Spreads
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Date
2013
Authors
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Journal ISSN
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Publisher
Elsevier Science Bv
Abstract
The aim of this study is to investigate the presence of long memory in sukuk yield spreads and forecast the future yield spreads for sukuk. Specifically, the focus is on the yield spread between Dow Jones Islamic Markets Index (DJIM) and the Malaysian Government Investment Issues (GII). The study uses monthly data on the DJIM Index and GII yields from 2005:08 to 2012:04. Data are sourced from Bloomberg database and Datastream. Using ARMA (autoregressive moving average) estimator method, the data are used to test the hypothesis that the yield spreads has long memory. The findings show no evidence that the yield spreads have long memory. Since yield spreads can serve as a leading indicator of economic conditions, the empirical estimator method used in this research has an implication for forecasting future yield spreads of Islamic debt market financial instruments. (C) 2013 The Authors. Published by Elsevier B.V.
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Keywords
Sukuk, yield spreads, long memory, ARMA, DJIM