MEASURING VOLATILITY OF DOW JONES SUKUK TOTAL RETURN INDEX USING GARCH MODEL

Syazwani Rahim, Nursilah Ahmad

Abstract


Abstract

 

The aim of this study is to measure the performance of the selected Sukuk index, Dow Jones Sukuk Total Return Index (DJSTRI) in the presence of 2008 global financial crisiswith trade-off risk and return by measuring the volatility behavior as the proxy of risk for the period under study. The data of  DJSTRI are collected from the Bloomberg database from the daily data of historical prices, 30/9/2005-12/5/2015 (2490 observations) excluding Saturdays and Sundays. The methodologies that are utilised in the study consisting of the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. The application of  GARCH (1,1) model can give the empirical analysis to forecast the volatility of DJSTRI. The researcher advises policy makers to guide regulators, investors and issuers to the best Sukuk that remained stable during a crisis. This analysis will provide valuable information and guidelines to Sukuk issuers, policy makers, regulatory bodies and investors to Islamic bonds.

 

Keywords: DJSTRI, Sukuk, Volatility, GARCH, Financial Crisis

 



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