Impact of Brexit on Islamic stock markets: employing MGARCH-DCC and wavelet correlation analysis

Purpose This paper aims to study the co-movement dynamics of Islamic equity returns explain international portfolio diversification opportunities for investors having a heterogeneous stock holding period in light Brexit. Design/methodology/approach The authors use following three recent methodologies: multivariate generalised autoregressive conditional heteroskedastic-dynamic correlations, continuous wavelet transforms and maximum overlap discrete transform. Dow Jones country-based indexes are used from 2 September 2013 31 December 2019. Findings There is high correlation between United Kingdom (UK) market return with Canadian, USA, Malaysian Indian implying lesser benefits investors. However, results tend indicate that UK who have allocated their investment Sri Lanka, Kuwait, Japan Turkey enjoyed benefits. Besides, there declining markets other selected aftermath seems most volatile over period, appealing risk-lover gain price changes. When shock occurs financial sector, volatility mean-reverting faster than Lanka. On hand, Malaysia appears least stable sector. Research limitations/implications shed on effective (Brexit) index vary country depending horizons. critically confirms significance heterogeneity horizons provides significant inferences strategies. Originality/value To best authors’ knowledge, this first investigating Brexit effect stocks, guiding Shariah sensitive strategies, providing information consider implications incident stocks future shocks.