Return and Volatility Interaction between Islamic Indice and Bitcoin: A Comparison of Türkiye and Malaysia

Abstract

With technology development, investment tools also vary. Money and capital market instruments are at the forefront of these, and virtual currencies have become investment tools. Because virtual currencies are not religiously permissible by many organizations causes the devout people to stay away from them. This study investigates the return and volatility interaction between Islamic Indices and Bitcoin in Türkiye and Malaysia. The study uses weekly data for the period 24 November 2013 – 2 January 2022 obtained from investing.com. Multivariate Dynamic Conditional Correlation (DCC-GARCH) and multivariate dynamic stochastic volatility models were used to determine the volatility dispersion between Islamic indices and Bitcoin. Results show that the volatilities of Türkiye Islamic Index, Malaysia Hijrah Shariah Index and Bitcoin are permanent. Volatility of Bitcoin, however, has no effect on the return of the Türkiye Islamic Index and the Malaysian Hijrah Shariah Index. Likewise, the volatility of Islamic indices does not affect the return of Bitcoin. According to the results of the DC-MSV model, the volatility of Islamic indices and the volatility of Bitcoin do not affect each other. This indicates that Islamic index investors and Bitcoin investors differ.