Are the new crypto-currencies qualified to be included in the stock of high quality liquid assets? a case study of bitcoin currency

As crypto-currencies hold dual nature of a medium of exchange (currency) and an investment asset, some questions may arise about the potentiality of including crypto-currencies as liquid investment asset in financial institutions particularly in the banking sector to enhance their liquidity risk management and improve their portfolio diversification investment strategy. The objective of this study therefore is to examine the characteristics of Bitcoin currency based on the requirements of High-Quality Liquid Assets (HQLA) standards of Basel III and compare its volatility structure with other traditional asset classes that are already recommended by Basle III as HQLA. The study utilizes both descriptive and quantitative analysis using the GARCH family models to examine the volatility structures of these assets. The findings show that Bitcoin currency holds the same characteristics of HQLA, however; the risk of legality and recognition is still under consideration by legal authorities around the world and this risk will be eradicated in the future as crypto-currencies derive their legality from their real intrinsic value, multi-economic usefulness and not by law as in the case of fiat money currency. Furthermore, the symmetric volatility structure analysis shows the continuing persistence of volatility and predictability behavior in return series of Bitcoin currency and other- traditional asset classes in the U.S. market. However, Bitcoin’s stability has gradually improved over time. With regard to the asymmetric informative response, Bitcoin returns respond more to negative shock but it has no statistical significance, thus suggesting the lack of leveraging effect in Bitcoin market but this effect was found to be statistically persistent in other traditional asset class markets. In addition, Bitcoin returns show very low correlation with other traditional asset classes. All these imply that Bitcoin is a potential candidate as a hedge and asset diversifier, which is recommended to be included in the HQLA. This study provides some support to recent theoretical work on crypto asset return behaviour and liquidity risk management. The findings provide appropriate information about Bitcoin asset behaviour compared to other traditional asset classes which will enable them to make the right investment decision with regard to hedging, diversification and liquidity risk management. The findings of this study may assist in evaluating the suitability of including crypto assets into HQLA to improve the liquidity requirement standards and ensure that banks have an adequate amount of HQLA specifically during times of financial turmoil

Testing the validation of the financial cooperation agreement among ASEAN+3 stock markets

Purpose: The purpose of this paper is to investigate the validation of the ASEAN+3 financial cooperation agreement among its members. In particular, it examines the long- and short-run relationships among the stock market indices of eight countries: China (CH), Japan (JP),Korea (KR), Malaysia (MY), Indonesia (ID), Philippines (PH), Thailand (TH), and Singapore (SG). Design/methodology/approach: The study applied a global VAR and vector error correction model (VECM) model to investigate this relationship using daily data over the period from first March 1992 to end of September 2013. The study period has been separated into pre-1997/1998 financial crisis period (1992-1997) and post-1997/1998 crisis period (1999-2013). Findings: The findings show that the stock markets in the ASEAN region are integrated during both periods of financial crises. However, the markets are moving toward better integration, particularly during the post-crisis period. This is supported by the results of the error correction which indicated that most ASEAN+3 stock market indices adjust quickly within the short run to a shock in the long-run equilibrium relationships in the region during both the pre- and post-crisis periods. In addition, the results of the VECM causality test showed that a short-run relationship exists among the ASEAN+3 stock market indices. Practical implications: The results of this study therefore have two implications: first, for investors in terms of construction of the portfolio diversification strategies across difference stock markets in Asian region, and second, for policy makers, as the study presents an understanding of financial exposure in their countries as consequences of changes that occur in the other stock market indices in the ASEAN region. Social implications: The investors can find the potential sectors for the portfolio investments. Originality/value: The paper is one of the pioneers to examine the validity of ASEAN+3 financial cooperation agreement. © 2017, © Emerald Publishing Limited

Identification of macroeconomic determinants for diversification and investment strategy for Islamic unit trust funds in Malaysia

Purpose – This study aims to investigate the role of selected macroeconomic variables in influencing the movement of Net Asset Value (NAV) of the Islamic Unit Trust Funds (UTFs) in Malaysia. In efforts to arrive at more enriching findings, the UTFs are further categorised into equity, bond, balanced, fixed, mixed, money market and feeder funds. Design/methodology/approach – The study adopts the Vector Autoregression framework (Johansen-Juselius (1990), cointegration test and Vector Error Correction Model to analyse the relationship between the macroeconomic variables and the NAVs of the various type of funds. Findings – The study shows that there is a significant long-run equilibrium relationship between the macroeconomic variables and the NAV of all Islamic UTFs in Malaysia. Despite of this, the findings show that different funds have different responses to the movements of the macroeconomic variables. Practical implications – The results of the study are of significant importance to the various stakeholders in the Islamic UTF industry. Investors benefit in terms of getting the inputs on their investment decisions as to whether to buy, hold or sell fund units within their investment portfolio in the long-run, along with building their optimal portfolio diversification investment strategy, especially in reallocating their assets distribution between the various types of funds in the UTFs industry. For the policy-makers, the findings of the study may assist them in evaluating the suitability of the existing economic policies as to whether they positively or negatively contribute to the development of the Islamic UTFs. Originality/value – This paper fulfils the need to understand how unit-holders can strategise and diversify their portfolio investments in the Malaysian Islamic UTFs industry based on detailed understanding and knowledge derived from rational and scientific inputs

Is the ‎Islamic unit trust market efficient empirical evidence from ‎Malaysia‎

Based on Malaysian data covering the period from April 2006 to December 2015, this study investigates the informational efficiency of the Islamic unit trust market. The study considers various types of Islamic unit trust funds and analyses their relationship with selected macroeconomic variables. The Engle and Granger (1987) and Granger (1969) causality tests are applied to seven models comprising different types of Islamic unit trust funds. Results show that Islamic equity, balance, fixed, and Feeder Funds violate the efficient market hypothesis (EMH), while the Islamic bond, mixed, and money market funds hold for the weak form of EMH. This provides empirical evidence to fund managers and unit-holders considering market efficiency in strategising their trading proficiency in UTFs. These findings also enable authorities to take steps towards improving funds disclosure practices, so that fund prices immediately reflect relevant information

مؤشر اللايبور واقعة وانعكاسات إلغاءه على المصارف الإسلامية، دراسة في التأثير والبدائل: معدل العائد الاسلامى (Islamic Rate of Return) نموذجا

الخطوات العريضه للبحث ➢ املقدمة ➢ مشكلة البحث ➢ التأصيل الشرعي يف إستخدامات مؤشر مايل يف إحتساب الفائدة وتسعري العقود للمعامالت املاليه ➢ املبادرات االسالمية املقرتحة يف بناء مؤشر يغين عن املؤشر التقليدي )LIBOR( ➢ النماذج املقرتحة دوليا لبناء مؤشر بديل ملؤشر(LIBOR( )الفائدة اخلالية من املخاطر – ➢ املشاكل التعلقة ابستحدم نظام سعر الفائدة املقرتحة دوليا (RFR(على البنوك االسالمية ➢ املعاجلات املقرتحة لألاثر املالية املرتتبة من استخدام الفائدة اخلالية من املخاطر (RFR )بعد عام 2021. ➢ النموذج املقرتح والبديل)معدل العائد اإلسالمي( )Return of Rate Islamic) ملؤشر الاليبور. ➢ اخلامته والتوصيا

The effect of symmetric and asymmetric information on volatility structure of crypto-currency markets: a case study of bitcoin currency

Purpose – This paper aims to examine whether the crypto-currencies’ market returns are symmetric or asymmetric informative, through analysing the daily logarithmic returns of bitcoin currency over the period of 2011-2017. Design/methodology/approach – In doing so, the symmetric informative analysis is estimated by applying the generalised auto-regressive conditional heteroscedasticity (GARCH) (1,1) model, whereasasymmetric informative or leverage effects analysis is estimated by exponential GARCH (1,1), asymmetric power ARCH (1,1) and threshold GARCH (1,1) models. In addition, the generalized autoregressive conditional heteroskedasticity in mean (GARCH-M (1,1)) was applied to examine whether the risk-return trade-off phenomenon was persistent in crypto-currencies market. Findings – The main findings indicate that bitcoin market return or volatility is symmetric informative and has a long memory to persist in the future. Furthermore, the symmetric volatility is found to be more sensitive to its past values (lagged) than to the new shock of the market values. However, asymmetric informative response of volatility to the negative and the positive shocks do not exist in the bitcoin market or, in other words, there is no leverage effect. This suggests that the bitcoin market is in harmony with the efficient market hypothesis (EMH) with respect to the asymmetric information and violated the EMH with regard to the symmetric information. Hence, the market price or return of bitcoin currency could not be predicted by simply exercising such past market information in the short-run investment. In addition, the estimated coefficient of conditional variance or risk premium (l ) in the mean equation of CHARCH–M (1,1) model is positive however, statistically insignificant. This indicates the absence of risk-return trade-off, in which case the higher market risk will not essentially lead to higher market returns. This paper has proposed that an investment in the crypto-currency market is more appropriate for riskaverse investors than risk takers. Originality/value – The findings of the study will provide investors with necessary information about the bitcoin market price efficiency, hedging effectiveness and risk management

The impact of zakat distribution on social welfare a case study of Selangor zakat agencies, Malaysia

This study empirically examines the effectiveness of yearly zakāt distribution as an instrument for social welfare in the state of Selangor, Malaysia. The study applied the autoregressive distributed lag (ARDL) approach to examine these relationships over the period from 2010 to 2018. Overall, the study found that the zakāt distribution contributes significantly to social welfare through education at a significance level of 5% and contributes inadequately through income level at 10% level of significance. This indicates that the current zakāt distribution system in Selangor provides only a marginal influence on increasing the income of the poor. Furthermore, the zakāt distribution was statistically insignificant to social welfare through healthcare. These findings suggest that the current distribution channels of health are insufficient to improve social welfare and should be improved by offering social health insurance policy for zakāt beneficiaries. This can be done via ratification insurance plan between zakāt agencies and insurance companies to cover the basic health needs for zakāt recipients

Assessing the relationship between the economic feasibility study and the guarantees provided by small and medium enterprises with the financing decisions in Kuwait = تقييم ارتباط دراسة الجدوى االقتصادية والضمانات المقدمة بقرارات التمويل للمشاريع الصغيرة والمتوسطة في دولة الكويت

This paper aims to measure both economic feasibility studies and guarantees provided by small and medium size enterprises and their relationships with the financing decisions of the Islamic banks in Kuwait. The study follows the quantitative approach. It aims to assess the internal conditions by the Islamic banks toward its decisions to finance the small and medium size enterprises. The sample of this study consists of 200 employees from the credit department from the Kuwait Islamic banks. The result found a significance and positive impact of the feasibility study on the small and medium size enterprises financing decisions at (p< 0.05). In addition, it shows a significance positive impact of the provided warranties on the small and medium enterprises financing decisions at (p< 0.05). The study recommends to reduce using the guarantees provided by enterprises should rely more on the visibility studies.------------- يهدف هذا البحث إلى قياس ارتباط كال من د ارسة الجدوى االقتصادية والضمانات المقدمة للتمويل المشاريع الصغيرة والمتوسطة وقرارات التمويل من المصارف االسالمية في دولة الكويت. اتبعت هذه الدراسة نوع الدراسات الميدانية المتضافرة باألسلوب الوصفي التحليلي، مستهدفا تقييما صحيحا للمتطلبات الداخلية إلقامة المشروعات الصغيرة والمتوسطة، والوقوف على اآلثار المترتبة من هذه المتطلبات على القرارات التي تتخذها المصارف اإلسالمية لتقديم تمويالت لهذه المشروعات. شملت عينة الدراسة 200 موظف من مجموع العاملين في المصارف اإلسالمية ضمن دائرة اإلئتمان. أظهرت النتائج وجود تأثير ذو داللة إحصائية عند مستوى داللة )05.0 )لد ارسة الجدوى اإلقتصادية للمشروعات الصغيرة والمتوسطة على قرارات تمويل هذه المشاريع من المصارف اإلسالمية الكويتية. كما اظهرت وجود تأثير ذو داللة إحصائية عند مستوى داللة )05.0 ) للضمانات المقدمة من المشروعات الصغيرة والمتوسطة على قرارات تمويل هذه المشاريع من المصارف اإلسالمية الكويتية. توصي الد ارسة قيام المصارف اإلسالمية الكويتية بالمساهمة في إعتماد د ارسات الجدوى االقتصادية للمشروع الصغير والمتوسط وذلك للوقوف على إمكانية نجاحه في المستقبل ولتقليل الضمانات المطلوبة لتمويله من قبل هذه المصارف

The role of zakat during pandemic crisis and post recovery (maqāsid al-sharīʽah perspective)

The Covid-19 pandemic suddenly claimed its existence with thousands of fatalities reported worldwide in just a few months. It has caused great concern and panic resulting to total halt in all activities particularly the economic sector. The lockdown has caused global economic contraction which has led to forecasted economic recession for the year 2020. Islamic social financing sees this phenomenon as an increase in the numbers of the needy and something has to be done. In Islamic social financing certain instruments have been identified as tools to mitigate the turmoil facing people who are badly affected by the pandemic. Zakat, sadaqah, qard al-hasan and infaq can play significant roles especially in providing financial aids to the needy. Zakat in particular has the potential to ease the financial situations for its huge collection recorded. This study employed the document analysis approach to examine the possible role zakat can play during and after the turbulence caused by the pandemic. The findings from the analyses revealed that Islamic social financing via its instruments like zakat, sadaqah, infaq and qard al-hasan are able to offer and provide financial assistance during and post crisis, in this case the Covid-19 pandemic in various sectors like the education, social and humanitarian as well as in the medical sector. The responsible party should continue to provide efficient and hassle free channel for zakat payers to continue paying zakat as it does help in providing sufficient funds and also eradicate poverty in a community that may be caused by any crises alike. The effective and efficient distribution programs are also equally important in ensuring the objective of zakat is achieved in helping the needy