Abstract:

This study aims to examine the risk factors that cause financial volatilities for Islamic finance. In line with this goal, the study examines the impact of USD currency, Economic and Political Uncertainty Index and Playability Index (VIX) on the World Islamic Stock Exchange Index. The data covering the period between 2002:5 and 2018:2 in the monthly frequency is analyzed using the expanded generalized conditional variance (GARCH) model. The findings of the study indicate that the dollar currency significantly and negatively affects the risk level of the World Islamic Stock Exchange Index. The findings also show that the Islamic Stock Exchange Index’s playability is more sensitive to changes in the dollar currency than the economic and political uncertainty index and the VIX index. These findings contain significant results in terms of the design of different risk-protection strategies for investors investing in Islamic exchanges against risk factors.

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