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Journal ArticleDOI

A fractional cointegration VAR analysis of Islamic stocks: A global perspective

TL;DR: In this paper, the authors analyzed the behavior of Islamic stocks from a global perspective covering an array of regional Islamic stock markets and employed both the fractional integration and fractional cointegration techniques to establish whether Islamic stocks are individually integrated with a fractional order and whether they are fractionally cointegrated on the other hand.
About: This article is published in The North American Journal of Economics and Finance.The article was published on 2020-01-01 and is currently open access. It has received 11 citations till now. The article focuses on the topics: Cointegration & Financial market.

Summary (2 min read)

Introduction

  • Learning to categorize perceptually similar stimuli can result in people becoming more sensitive to differences along perceptual dimensions that are relevant to category membership and/or less sensitive to equivalent differences along irrelevant perceptual dimensions.
  • At the same time, however, the association of the taste of each wine with the distinct names will become inveterate.
  • For participants in Group S, the two colours were associated with one label and the two shapes with the other.
  • Both associative mediation and attentional weighting predict an increase in discriminability between categories, and a reduction in discriminability along the irrelevant stimulus dimension.

Method

  • Forty undergraduate psychology students at the University of Hull served as participants.
  • 23 of the participants failed to meet the learning criterion of 75% correct responses over the final 64 trials of the categorization task.
  • For the third group, patterns APX, AQX, AQY, and BQX were in category 1 and patterns APY, BPX, BPY, and BQY were in category 2.
  • Other details were the same as for Experiment 1.
  • Within each block of eight trials, each of the eight patterns was presented once in a random order.

Results and Discussion

  • Because the authors were interested in the effects of category learning on perceptual similarity, they fully analysed the data only of participants who successfully solved the categorization task.
  • The group mean proportion of correct responses is shown in Figure 4a for participants who reached the criterion of 75% correct responses over the last 64 trials, and for the participants who failed to reach this criterion.
  • Participants were more sensitive to the difference between two patterns when they differed on two dimensions than when they differed on one dimension.
  • Hence, the contribution of associative mediation to a participant’s sensitivity to the difference between such patterns should be equivalent regardless of whether both dimensions were relevant or only one was.

Results and discussion

  • 17 participants reached the criterion of 75% correct responses over the final 64 trials of the categorization phase.
  • On average, participants who reached the criterion made the correct response on 14.8 of the final 16 trials.
  • Because all three stimulus dimensions were relevant, and equally predictive of outcome for all participants, acquisition data are not shown separately for each counterbalancing group.
  • Participants were more sensitive to the difference between two patterns when they differed on two dimensions than when they differed on one dimension.

Bayesian Comparison of the Null and Experimental Hypotheses

  • Bayes factors may be calculated to give a measure of the relative strength of support for both experimental and null hypotheses.
  • This calculator estimates the likelihood of the null and experimental hypotheses given the data.
  • The likelihood of the null hypothesis is the height of the normal distribution with a mean of zero and standard deviation equal to the standard error of the sample mean.
  • This allowed us to model the prediction of each mechanism as a half-normal distribution with a mean of zero and a standard deviation equal to the expected size of effect (Dienes, 2014).
  • Experiment 1 provided strong evidence, and Experiment 2 decisive evidence, in support of an effect of attentional weighting according to the categories proposed by Jeffreys (1961).

General Discussion

  • In three experiments, participants were trained on conditional categorization tasks involving stimuli which differed on three binary dimensions.
  • Again, associative mediation did not interact with this effect.
  • Faster learning was observed when colour was relevant than when the patterns were, suggesting that for pigeons colour is more salient than pattern.
  • Having learned that two stimuli belong to the same category, participants might reason that they should be given a higher similarity rating than two stimuli which belong to different categories.
  • Since other authors have reported results consistent with associative mediation (or verbal reasoning), one question that remains to be answered is whether the structure of the task or the discriminability of the stimuli is a more important determinant of its influence on behaviour.

Author Note

  • This research was supported by a Small Grant from the Experimental Psychology Society (eps.ac.uk) and is based on ideas developed when DNG was a visiting research fellow at the School of Psychology, UNSW Australia.
  • DNG is grateful to UNSW Australia for the generous provision of facilities during this period.

Figure Captions

  • The structure of the categorization tasks used in (a) Experiment 1, (b) Experiment 2, and (c) Experiment 3.
  • The reference line indicates chance performance (50% correct).
  • Patterns could differ on one relevant (R), one irrelevant (I), two relevant (RR), or one relevant and one irrelevant (IR) dimension(s).
  • Numbers presented to the top-right of each plot give, for each perceptual dimension, the average distance between the four pairs of stimuli that differ only on that dimension (e.g., aPX vs. bPX; aPY vs. bPY; aQX vs. bQX; aQY vs. bQY).
  • (b) Average d’ sensitivity to differences between pairs of patterns compared during the test phase of Experiment 3.

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Citations
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Posted Content
TL;DR: In this article, the authors applied the tests for unit root and other nonstationarity of Robinson (1994a) to an extended version of the data set used by Nelson and Plosser (1982) and found that consumer price index and money stock seem the most nonstationary, while industrial production and unemployment rate seem the closest to stationarity.
Abstract: Recently proposed tests for unit root and other nonstationarity of Robinson (1994a) are applied to an extended version of the data set used by Nelson and Plosser (1982). Unusually, the tests are efficient (against appropriate parametric alternatives), the null can be any member of the I(d) class, and the null limit distribution is chi-squared. The conclusions vary substantially across fourteen series, and across different models of the disturbances (which, also unusually, include the Bloomfield spectral model). Overall, the consumer price index and money stock seem the most nonstationary, while industrial production and unemployment rate seem the closest to stationarity.

382 citations

Journal ArticleDOI
TL;DR: In this paper, the authors investigated the interdependence between the returns of gold and Dow Jones world Islamic index along with ten Islamic sectoral indices using quantile based methodologies that ascertain the interdependencies under various market conditions.

19 citations

Posted Content
TL;DR: In this article, the authors investigated the possibility of fractional integration in sectoral returns and their volatility measures at Jordan's Amman stock exchange (ASE) from 2006 to 2014.
Abstract: Using daily data on five sectoral indices from 2006 to 2014, this paper aims to investigate the possibility of fractional integration in sectoral returns (and their volatility measures) at Jordan’s Amman stock exchange (ASE). Empirical analysis, using the Log-periodogram (LP) and Local Whittle (LW) based semi-parametric fractional differencing techniques suggest that all sectoral returns at ASE exhibit short memory. However, in the case of volatility measures, we found evidence of long memory. Following the recent literature that argues that structural breaks in a time series could also explain the presence of long memory, we tested the volatility measures for presence of structural breaks. We found that long memory in some volatility measures could be attributed to the presence of structural breaks. Furthermore, using impulse response functions (IRF) based on ARFIMA, we found that shocks to sectoral returns at ASE exhibit short run persistence, whereas shocks to volatility measures display long run persistence.

12 citations

Journal ArticleDOI
29 Jun 2021
TL;DR: In this paper, the predictive value of geopolitical risk (GPR) for the return volatility of Islamic stocks in Indonesia and Malaysia is examined, and improved out-of-sample forecast gains are shown with the inclusion of GPR data in the predictive model of the return variance of the Islamic stocks.
Abstract: In this paper, the predictive value of geopolitical risk (GPR) for the return volatility of Islamic stocks in Indonesia and Malaysia is examined. GPR data, whether global or country-specific, heighten the return volatility of Islamic stocks in both countries, albeit with a greater impact on Indonesia. Additional analyses show improved out-of-sample forecast gains with the inclusion of GPR data in the predictive model of the return volatility of Islamic stocks.

11 citations


Cites background or result from "A fractional cointegration VAR anal..."

  • ...This outcome corroborates the findings of Salisu et al. (2020), who emphasize the role of global factors when modeling Islamic stocks. a 1 2 3 Ndako, U. B., Salisu, A. A., & Ogunsiji, M. O. (2021)....

    [...]

  • ...Nonetheless, the shock effect may persist for a while, given that the sum of the ARCH and GARCH terms is close to unity (see also Salisu et al., 2020)....

    [...]

Proceedings ArticleDOI
01 Jan 2020
TL;DR: In this paper, the authors analyse financial integration in the markets of Brazil, China, India and Russia, from July 2015 to June 2020, being the sample split in pre and during the global pandemic (Covid-19).
Abstract: This paper aims to analyse financial integration in the markets of Brazil, China, India and Russia (BRIC’s), from July 2015 to June 2020, being the sample split in pre and during the global pandemic (Covid-19). In order to carry out this analysis, different approaches were undertaken to analyse two issues, namely, whether: (i) the global pandemic has accentuated the interdependencies in the BRIC financial markets? If so, how it has influenced the efficiency of portfolio diversification. The results suggest very significant levels of integration, in the Covid period these evidences diminish the chances of portfolio diversification in the long term. In turn, the analysis of the relationship between markets, in the short term, through the impulse response functions, in a period of global pandemic, shows positive/negative movements, with statistical significance, with persistence exceeding one week. In addition, there was no immediate adjustment in prices between markets, due to the high levels of shocks identified. Regarding the implementation of efficient portfolio diversification strategies, we consider that a good option for investors would be to avoid investments in stock markets. In this sense, one suggestion could be to invest in derivatives, gold and sovereign debt markets, with the purpose of diversifying portfolios and mitigating the risk arising from the global pandemic. The authors consider that the results achieved are of interest to investors seeking opportunities in these exchanges, as well as to policy makers to undertake institutional reforms in order to increase the efficiency of stock markets and promote the sustainable growth of financial markets.

5 citations


Cites background from "A fractional cointegration VAR anal..."

  • ...Tripathy (2015), Siddiqui (2015), Ranjan Dasgupta (2016) analysed financial integration in BRIC’s markets....

    [...]

  • ...However, there are studies that have analysed the integration and diversification of risk in BRIC markets, namely, the authors Tripathy (2015), Siddiqui (2015), Ranjan Dasgupta (2016)....

    [...]

  • ...On the contrary, Siddiqui (2015) show that the stock markets of Brazil, Russia, India and China (BRIC) are not integrated in the long term and in the short term there are no causal relationships between these markets....

    [...]

References
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Journal ArticleDOI
TL;DR: Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting of the American Finance Association New York, N.Y. December, 28-30, 1969 (May, 1970), pp. 383-417 as mentioned in this paper
Abstract: Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene F. Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting of the American Finance Association New York, N.Y. December, 28-30, 1969 (May, 1970), pp. 383-417 Published by: Blackwell Publishing for the American Finance Association Stable URL: http://www.jstor.org/stable/2325486 Accessed: 30/03/2010 21:28

18,295 citations

Book
01 Feb 1996
TL;DR: In this paper, a detailed mathematical and statistical analysis of the cointegrated vector autoregresive model is given, with the main emphasis on the derivation of estimators and test statistics through a consistent use of the Guassian likelihood function.
Abstract: This book gives a detailed mathematical and statistical analysis of the cointegrated vector autoregresive model. This model had gained popularity because it can at the same time capture the short-run dynamic properties as well as the long-run equilibrium behaviour of many non-stationary time series. It also allows relevant economic questions to be formulated in a consistent statistical framework. Part I of the book is planned so that it can be used by those who want to apply the methods without going into too much detail about the probability theory. The main emphasis is on the derivation of estimators and test statistics through a consistent use of the Guassian likelihood function. It is shown that many different models can be formulated within the framework of the autoregressive model and the interpretation of these models is discussed in detail. In particular, models involving restrictions on the cointegration vectors and the adjustment coefficients are discussed, as well as the role of the constant and linear drift. In Part II, the asymptotic theory is given the slightly more general framework of stationary linear processes with i.i.d. innovations. Some useful mathematical tools are collected in Appendix A, and a brief summary of weak convergence in given in Appendix B. The book is intended to give a relatively self-contained presentation for graduate students and researchers with a good knowledge of multivariate regression analysis and likelihood methods. The asymptotic theory requires some familiarity with the theory of weak convergence of stochastic processes. The theory is treated in detail with the purpose of giving the reader a working knowledge of the techniques involved. Many exercises are provided. The theoretical analysis is illustrated with the empirical analysis of two sets of economic data. The theory has been developed in close contract with the application and the methods have been implemented in the computer package CATS in RATS as a result of a rcollaboation with Katarina Juselius and Henrik Hansen.

4,865 citations

Journal ArticleDOI
TL;DR: In this article, a new estimator of the long memory parameter in these models is proposed, based on the simple linear regression of the log periodogram on a deterministic regressor.
Abstract: . The definitions of fractional Gaussian noise and integrated (or fractionally differenced) series are generalized, and it is shown that the two concepts are equivalent. A new estimator of the long memory parameter in these models is proposed, based on the simple linear regression of the log periodogram on a deterministic regressor. The estimator is the ordinary least squares estimator of the slope parameter in this regression, formed using only the lowest frequency ordinates of the log periodogram. Its asymptotic distribution is derived, from which it is evident that the conventional interpretation of these least squares statistics is justified in large samples. Using synthetic data the asymptotic theory proves to be reliable in samples of 50 observations or more. For three postwar monthly economic time series, the estimated integrated series model provides more reliable out-of-sample forecasts than do more conventional procedures.

3,070 citations

Journal ArticleDOI
TL;DR: This article found that a slowly mean-reverting component of stock prices tends to induce negative autocorrelation in returns, which is weak for the daily and weekly holding periods common in market efficiency tests but stronger for long-horizon returns.
Abstract: A slowly mean-reverting component of stock prices tends to induce negative autocorrelation in returns. The autocorrelation is weak for the daily and weekly holding periods common in market efficiency tests but stronger for long-horizon returns. In tests for the 1926-85 period, large negative autocorrelations for return horizons beyond a year suggest that predictable price variation due to mean reversion accounts for large fractions of 3-5-year return variances. Predictable variation is estimated to be about 40 percent of 3-5-year return variances for portfolios of small firms. The percentage falls to around 25 percent for portfolios of large firms.

3,015 citations

Frequently Asked Questions (1)
Q1. What have the authors contributed in "Disentangling the effects of attentional weighting and associative mediation in perceptual learning reveals no evidence for associative mediation abbreviated title: attention and mediation in perceptual learning" ?

The authors report three experiments using complex category structures, which allowed us to assess the independent influence of each mechanism on stimulus similarity. Hence, the pairs of shapes that were followed by a particular rectangle in the first phase of the experiment required the same response in the second phase. The results suggest that, in these categorization tasks, attentional weighting affects perceptual similarity but associative mediation does not. An early explanation of acquired distinctiveness was put forward by James ( 1890 ), suggesting that the discriminability of two very similar stimuli might be enhanced if they are associated with other events which are quite different from each other. This pattern of results Attention and mediation in perceptual learning 6 suggest that, for Group Consistent, a mental representation of rectangle X was retrieved when either shape A or B was presented during the second phase and this representation became associated with the left key press response. These results suggest that the stimuli may activate the label with which they are associated and the label, in turn, exerts a top-down effect on perceptual representations ( Lupyan, 2012 ). Consistent with this suggestion, Russian speakers perform better than English speakers in a speeded colour discrimination between blues which have different names in Russian, but do not in English. Lawrence ( 1952 ) suggested that the importance of this type of discrimination learning is that it allows an animal to isolate the relevant stimulus dimension from other irrelevant cues. They argued that the associations formed during discrimination learning are not responsible for acquired equivalence and distinctiveness effects ( as suggested by the associative mediation account ), but rather discrimination training makes the subject attend to differences between stimuli which were previously undetected, and to ignore irrelevant features. Predictions are further complicated because exposure to the test stimuli ( or to stimuli very similar to them ) during category training might have effects on performance which are not directly related to category learning ( e. g., unsupervised learning processes such as imprinting ; see Goldstone, Attention and mediation in perceptual learning 1