THE RELATIONSHIP BETWEEN ISLAMIC INDICES AND COMMODITY MARKETS IN TURKEY: EVIDENCE FOURIER-BASED APPROACHES

Şakir Sakarya1, Feyyaz Zeren2 and Hilmi Tunahan Akkuş

1Department of Business Administration, Balıkesir University, Balıkesir, Turkey
2Department of International Trade and Finance, Yalova University, Yalova, Turkey

Affecting a significant portion of the world economy, the commodity market is the world’s largest “nonfinancial” market. In addition to the other macroeconomic variables, commodity prices have a special importance for Islamic stock indices, which have improved in recent years because Islamic finance is a financial system based on the profit/loss sharing principle and supports the real sector’s activities. In this study, cointegration and the causality relationship between commodity markets (the Gold ounce and Brent oil) and the Participation-30 Index established by taking Islamic criteria into account were investigated in Turkey. As a result of the analysis, no cointegration relation was found between the Participation-30 Index and the commodity markets. According to these results, an investor investing in gold or oil will, in addition to the Participation-30 Index, diversify its portfolio with this commodity investment and minimize its risk. The fact that there is no relation between the variables according to the causality results indicates that the Participation-30 Islamic Indices’ structure is independent of commodity markets and conventional stock markets.

Keywords: Participation-30 Islamic Indices, commodity markets, Fourier-based approaches, portfolio diversification

JEL Classification: G11, G15