Is Sukuk Market Efficient?  Evidence from the Malaysian Sukuk Market

Nursilah  Ahmad; Nor Haziah  Hashim; Syazwani  Abd Rahim

doi:10.33102/jmifr.v17i2.292

Authors

Nursilah Ahmad Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia
Nor Haziah Hashim Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia
Syazwani Abd Rahim Akademi Pengajian Islam dan Kontemporari (ACIS), Universiti Teknologi MARA Cawangan Johor, Kampus Segamat, Jalan Universiti Off Km. 12 Jalan Muar, 85000 Segamat, Johor, Malaysia

DOI:

https://doi.org/10.33102/jmifr.v17i2.292

Keywords:

Sukuk market, efficiency, financial crisis, Sukuk Indices, GARCH-M

Abstract

Market efficiency in capital markets is used to explain the degree to which prices reflect all available and relevant information about the fundamental value of the securities to help investors make informed decisions. Sukuk are priced according to the value of the assets backing them. The aim of the paper is to measure market efficiency of three Malaysian sukuk indices namely Bloomberg AIBIM Bursa Malaysia Corporate Sukuk Index (AIBIM), Bloomberg Malaysian Sukuk Ex-MYR Index (EXMYR) and Malaysian Foreign Currency Sukuk Index (MFCSUKUK). Daily returns of the three sukuk indices are collected for the period of 2010 until 2015. The efficiency was measured using GARCH-in-Mean (GARCH-M) estimation to identify different types of sukuk market efficiency. The findings indicate that EX-MYR and MFCSUKUK indices display weak form efficient market behaviour while AIBIM falls under the inefficient category. The inefficient market signals that all public information might not be fully reflected in the price, hence there is room for bargaining process or prices could be under or over-valued. For industry players, sukuk structural inefficiencies and sectorial mispricing behavior create investment opportunities due to possible existence of excess profit. For policy makers, an extreme case of inefficient market leads to market failure and welfare loss.

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Author Biographies

Nursilah Ahmad, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia

Nor Haziah Hashim, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Bandar Baru Nilai, Malaysia

Syazwani Abd Rahim, Akademi Pengajian Islam dan Kontemporari (ACIS), Universiti Teknologi MARA Cawangan Johor, Kampus Segamat, Jalan Universiti Off Km. 12 Jalan Muar, 85000 Segamat, Johor, Malaysia

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