INCEIF Knowledge Repository (INCEIF University)
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Oil price risk in selected ASEAN markets
No full textThis paper analyzes the oil price risk in four ASEAN markets using a two-factor "market and oil" model and EGARCH(1, 1) variance specification. In the analysis, three alternative non-linear measures of oil prices are used and robustness check of basic results is also performed. The results suggest a direct relation between oil price changes and stock market returns and indicate no evidence for asymmetric oil price risk for Indonesia. Meanwhile, the asymmetric oil price risk seems apparent for the markets of Malaysia, Singapore and Thailand. For an oil exporting Malaysia, the oil price decline tends to compromise its market performance while the oil price increase does not seem to be beneficial. In contrast, for oil-importing Singapore and Thailand, the oil price shocks tend to adversely affect their market returns. The contrasting experiences of these markets in the face of oil price fluctuations are attributed to the degree of oil dependency, level of financial development, and trade openness
Limited purpose banking (LPB) and Islamic finance: could LPB model be applied to Islamic finance?
No full textThis paper primarily aims to review and analyze a new model for Islamic finance based on Laurence J. Kotlikoff's idea of limited purpose banking (LPB). In addition, this paper aims to highlight, explain and discuss various aspects of LPB and how it suits the original aspirations of pioneer writers in Islamic finance. Based on an extensive literature review, this paper aims to highlight, explain and discuss the reform of the Islamic finance industry based on Kotlikoff's model of LPB. Based on a modified LPB model, Islamic financial institutions could be established to provide specific services with clear aims and objectives. These LPB Islamic financial institutions would operate in a similar way to LPB. As there is no perfect plan, the proposal of this paper is far from being perfect and is open to discussions and improvements. The paper will, hopefully, spark off quite a discussion on the topic; may result in a better understanding of the model; and provide some alternative solutions to the current structurally ill financial system. The paper provides some practical ideas for a better implementation of Shari'ah principles in financial intermediation of the Islamic financial system. Kotlikoff's LPB proposal for reforming the financial system is new and has been directed to the conventional financial system. This paper represents the first attempt to apply his proposal to the Islamic finance industry
Linkages between education expenditure and economic growth: evidence from ‘Chindia’
No full textThis paper examines the relationship between education expenditure and economic growth in China and India by employing annual data from 1970 to 2005. This study utilizes multi econometric tools such as the Johansen-Juselius (1990) co-integration test, Ordinary Least Square (OLS) method, Dynamic Ordinary Least Square (DOLS), Vector Error Correction Model (VECM) as well as variance decomposition to obtain a robust and consistent result. The findings indicate that there exists a long run trending relationship between income level (Gross Domestic Product per capita (GDPpc) and education expenditure in both China and India. In the long run, a unidirectional causal relationship could be detected for both countries, running from income level to education expenditure for the case of China, while for the case of India education expenditure Granger causes income level. The results are robust and consistent across all methods
How to achieve further progress in Islamic finance
No full textIslamic finance is a fairly young industry. It is only 30 years old. When I first began looking into the industry back in the late 1970s, the asset size was about US1 trillion. This growth is a good sign; however, in order to progress further the industry and policy makers need to consider the lessons of the most recent financial crisis and explore the path that would take the industry forward without experiencing similar crises
Islamic finance: an overview
No full textThe recurring financial crises with the global financial crisis as a latest example have placed the financial markets operating on the basis of interest rate, normally referred as conventional financial markets, under close scrutiny. While some have looked at ways and means to fix the instability inherent in the conventional interest-based system, others have searched for alternative financial systems. In this respect, the Islamic financial system seems to offer a promising avenue for future financial resiliency and stability. However, to date, this view has been largely circulated within professional circles and only recently it has become a topic of academic inquiries
Understanding development in an Islamic framework
No full textIn this paper, the foundational rules governing human, economic and financial development in Islam, as understood from the Qur’ān and from the life and traditions of the Prophet Muhammad (pbuh), are summarized. These rules pave the path to development as the basis of institutional structure, which in turn, underpin the path of economic and social progress. The essential elements in the life of a Muslim - the unity of creation, freedom and freedom of choice, economic and human development, economic system and financial practice - are developed
Efficiency, cost of intermediation, discretionary accruals: empirical evidence from Yemen banking sector
No full textEfficiency measurement has received increased attention amid global changes and growing competition within the finance industry in all countries, including developing countries such as Yemen. The evaluation of efficiency is crucial for players in the industry, not only to assess their ability for survival, but also to remain competitive in the market. Besides, efficiency would have consequences on other areas including bank margins and earnings manipulations. Like others, Yemen's banking industry has witnessed structural changes over the past decade, which paved the way for the industry to upgrade its efforts to emulate international standards. The present study analyses the efficiency of Yemen's banking sector during the 1996-2011 period. A two-stage analysis using Data Envelopment Windows Analysis (DEWA) was employed in the first stage of the research to measure the efficiency trends of industry, followed by the panel regression technique in the second stage to examine the determinants of efficiency. As efficiency of is a major concern for all stakeholders given its implications for various areas of banking operation such as bank margins and the opportunistic behaviour via discretionary accruals "manipulation" of earnings, the study also examines on whether the effeciency would have impacted the bank margins and earnings quality
The Lembaga Urusan dan Tabung Haji: financing the modern pilgrimage
No full textThe Tabung Haji is one of the most successful institutions for financing and organizing the modern pilgrimage. This was confirmed in 1990, when it was awarded the Islamic Development Bank prize in Islamic banking for the services it has provided to Malaysian pilgrims. In this chapter we will explain not only its establishment but also the reasons behind its success. This information will be provided in the hope that other Islamic countries may also wish to establish similar institutions
Is there a link between migration and human development? The case of Malaysia and selected countries
No full textThe paper "Is there a link between migration and human development? The case of Malaysia and selected countries" presented at 6th International Borneo Business Conference (IBBC) 2014, Kuching, Sarawak, Malaysia
Option pricing: Stock price, stock velocity and the acceleration Lagrangian
No full textThe industry standard Black-Scholes option pricing formula is based on the current value of the underlying security and other fixed parameters of the model. The Black-Scholes formula, with a fixed volatility, cannot match the market's option price; instead, it has come to be used as a formula for generating the option price, once the so called implied volatility of the option is provided as additional input. The implied volatility not only is an entire surface, depending on the strike price and maturity of the option, but also depends on calendar time, changing from day to day. The point of view adopted in this paper is that the instantaneous rate of return of the security carries part of the information that is provided by implied volatility, and with a few (time-independent) parameters required for a complete pricing formula. An option pricing formula is developed that is based on knowing the value of both the current price and rate of return of the underlying security which in physics is called velocity. Using an acceleration Lagrangian model based on the formalism of quantum mathematics, we derive the pricing formula for European call options. The implied volatility of the market can be generated by our pricing formula. Our option price is applied to foreign exchange rates and equities and the accuracy is compared with Black-Scholes pricing formula and with the market price