Movement of Shariah Indices in Financial Crisis Period : Exploring Evidences from National Stock Exchange of India

We attempted to reveal the co-movement and to model the risk and return of CNX 500 and CNX 500 Shariah of National Stock Exchange of India, with reference to global financial and euro zone crisis. Closing prices from 1st January, 2007 to 30th April 2015 are used to empirically measure the time varying effects. The sample is divided into six periods. Johansen Co-integration, Vector Auto-regression, and Granger Causality are calculated. GMM and E-GARCH Models are also employed. Shariah indices earned more return only in half of the periods, but are lesser volatile. Tests do not show any long term association and causality between both indices. CNX 500 is affected by its own lag but does not affect its Shariah counterparts. Euro and US dollar both are significant to estimate returns, except in some cases. Both indices show leverage effects. This study is done with limited objectives and time period. Results may vary with other indices and time period. The study will help the portfolio managers and investors in revision of their portfolios, if they look to reduce the risk of the portfolios and earn relatively higher returns. As CNX 500 does not share any long term or short term relation with Shariah Index, so it is recommended for diversification even in crises