Resilience of Islamic Capital Markets in Global Economic Volatility: An Empirical Analysis of Risk and Return of Indonesian Islamic Stocks

Abstract

This study evaluates the resilience of the Indonesian Islamic capital market in the face of global economic volatility through an empirical approach to the risk and return of Islamic stocks. Quantitative methods are applied using time series econometric models GARCH and GARCH-X to identify volatility dynamics and the influence of external variables, such as global interest rates, exchange rates, and economic uncertainty. The results show that the volatility of Islamic stocks is persistent and significantly influenced by global factors, indicating integration with international financial markets. However, the volatility of Islamic stocks is relatively more controlled compared to conventional markets, reflecting the resilience of these markets. The implications of this study highlight the potential of Islamic stocks as a stable investment instrument for portfolio diversification and emphasize the importance of strengthening policies to increase market resilience to global shocks. The novelty of this study lies in the integration of global volatility analysis with risk and return measurements within a single empirical framework, particularly in emerging markets like Indonesia. Overall, the Islamic capital market has proven to be adaptive and stable in the face of global economic dynamics.