Journal of Islamic Banking and Finance

Between BRIC and G3: Shariah-Compliant Stock Markets Cointegration
Risqo Muslimin Wahid

Abstract
This study aims to examine the persistence of Shariah-compliant stock markets cointegration between the BRIC (Brazil, Russia, India and China) and the G3 (US, Europe and Japan). The analysis utilises monthly data of seven S&P Shariah Dow Jones Indices to represent Shariah-compliant stock markets in the BRIC and in the G3, covering the period of November 2007 to August 2013. The method incorporated is autoregressive distributed lag (ARDL) model. It evidenced that each of the Shariah-compliant stock market in the BRIC countries is not cointegrated with their counterparts in the G3. This finding could cater Islamic-oriented investors and asset managers in the G3 countries significant risk reduction in their portfolio diversification for a given level of return for investing in one of the Shariah- compliant stock market in the BRIC countries.

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