Findriver- Driven Relationship among Shariah Compliant Indian and Indonesian Indices – An Empirical Evidence using Granger Causality


  • Badal Soni Virginia Commonwealth University
  • Sarthak Roy Western Michigan University



Granger Causality, Shariah Indices, Linkage, Log Return, Reciprocity


This paper attempts to establish the driver-driven relationship, co-integration, and causality relation between the Shariah indices of India and Indonesia. For this reason, two Indian Shariah indices, Nifty 500 and S&P BSE 500 Shariah and two Indonesian Shariah indices IDX Shariah and Jakarta Islamic Index (JII) have been taken into consideration. A total of 1585 data points have been taken into account, and the period of the study is from May 2013 to October 2019 (approximately six years and six months). Empirical evidence of the study proves that there is reciprocity among the Shariah index of India, Nifty 500 Shariah, and S&P BSE 500 Shariah. There exists no relationship between IDX Shariah and Jakarta Islamic Index when compared with Nifty 500 Shariah, individually. IDX Shariah is a driver index, though it is 11 years younger than Jakarta Islamic Index and, which is the driven index.


Bacha, O., & Mirakhor, A. (2018). Islamic capital market: A comparative approach (2nd ed.). Singapore: World Scientific Publishing Co. Pte. Ltd.

Ghosh, B., & Srinivasan, P. (2015). Rationale of investing to re-script the India story- A case on CNX Shariah. Re Scripting India's Growth Story CMS B School Jain University Bangalore. Retrieved from

Ghosh, B., & Srinivasan, P. (2013). Shariah Investment in India: An Unexplored Opportunity. International Journal of Innovative Research & Development, 2(12),33–37. Retrieved from https://

Ghosh, B., & Srinivasan, P. (2015). A Statistical Analysis of the Stochastic Drift between Sensex & Nifty- an in-Depth Study. International Journal of Innovative Research & Development, 4(5), 12. Retrieved from

Ghosh, B. (2016). Do the Dragons Move Together; Co-integrated and causality study among Chinese bourses-A curious case of Hang Seng and Shanghai Stock Exchange. Al-Barkaat Journal of Finance & Management, 8(2), 1-8.

Granger Causality. (n.d.). Retrieved from https:// wiki/Granger_causality

Habib, M., & Islam, K. (2014). Performance of Shariah Compliant Index: A Comparative Study of India and Malaysia. International Journal of Interdisciplinary and Multidisciplinary Studies (IJIMS), 1(6), 231–241. Retrieved from publication/ 316654788_Performance_of_Shariah_Compliant_Index_A _Comparative_Study_of_India_and_Malaysia

IDX Shariah (JKISSI). (n.d.). Retrieved October 31, 2019, from

Irfan, M. (2016). A Study of Islamic Stock Indices and Macroeconomic Variables. International Journal of Economics and Management Engineering, 10(7), 2553–2561. Retrieved from https:// publications/10006075/a-study-of-islamic-stock-indices-and-macroeconomic-variables

Islamic Products. (n.d.). Retrieved October 31, 2019, from

Islamic Stock Index. (n.d.). Retrieved October 31, 2019, from

Jakarta Islamic (JII). (n.d.). Retrieved October 31, 2019, from

Jakarta Islamic Index. (n.d.). Retrieved October 31, 2019, from

Joseph, T., & Verma, A. (2018). Driver-Driven relationship between the Tokyo Stock Exchange Indices- TOPIX and NIKKIE. Asian Journal of Management, 9(4).

Karim, B., Linn, J., & Karim, Z. (2017). Determinants of the Islamic Stock Markets Integration. Accounting and Finance Research, 6(3), 147–152.

Log return. (n.d.). Retrieved November 4, 2019, from Princeton University website:

Matharu, T. (2019). Interlinking the Shariah-Compliant Stocks in India: An Analysis Using Granger Causality. Ushus-Journal of Business Management, 18(3), 39–49.

Methodology document of nifty 50 Shariah index nifty 500 Shariah index nifty Shariah 25 index. (n.d.).

Panna, M. (2017). Note on simple and logarithmic return. APSTRACT: Applied Studies in Agribusiness and Commerce, 11(1033-2017-2935), 127-136.

Mansoori, M. T. (2011). Is" Islamic Banking" Islamic? Analysis of current debate on Sharī'ah legitimacy of Islamic banking and finance. Islamic Studies, 383-411.

Dharani, M., Narayanamoorthy, V., & Natarajan, P. (2015). An Empirical Study on Volatility Pattern of the Shariah Compliant Stocks in Indian Capital Market. Journal of Economic Policy and Research, 10(2), 150–165.

Nifty Indexogram. (n.d.). Factsheet/ Factsheet_Nifty500_Shariah.pdf

Munusamy, D., & Natarajan, P. (2011). Equanimity of risk and return relationship between Shariah index and general index in India. Journal of Economics and Behavioral Studies (JEBS), 2(5), 213-222.

Natarajan, P., & Dharani, M. (2012). Shariah Compliant Stocks in India: A Viable and Ethical Investment Vehicle. Oman Chapter of Arabian Journal of Business and Management Review, 34(953), 1-13.

Patric, W. (2019). Free Statistics Software, Office for Research Development and Education. Retrieved from https://

Pew Research center. (2015). 10 Countries with the Largest Muslim Populations, 2010 and 2050. Retrieved from https://

S&P BSE 500 Shariah. (n.d.). Retrieved October 31, 2019, from

S&P BSE 500 Shariah Index. (n.d.). Retrieved October 31, 2019, from

S&P BSE 500 SHARIAH Methodology. (n.d.). Retrieved from file:///C:/Users/Admin/Downloads/methodology-sp-bse-500-Shariah-indices.pdf

S&P Shariah Indices Methodology. (n.d.). Retrieved from file:///C:/ Users/Admin/Downloads/methodology-sp-Shariah-indices.pdf

Samadder, S., & Bhunia, A. (2018). Integration between Indian Stock Market and Developed Stock Markets. Journal of Commerce and Accounting Research, 7(1), 13.

Kumar, A. S., & Srividya, V. (2014). Stock Market Interlinkages among the Two Largest Emerging Economies of Asia--The Case of India and China. International Journal of Economic Perspectives, 8(4).

Shariah. (n.d.). Retrieved September 20, 2019, from https://

Sheng, A., & Singh, A. (2013). Islamic stock markets in a global context. Economic development and Islamic finance, 275.

Irfan, M., & Tanwar, S. Are Shariah and Non-Shariah Indices Related? Some Empirical Evidence from India. IOSR Journal of Business and Management (IOSR-JBM), 19(7).

Verma, A., & Treesa Joseph, T. The Causal Relationship between the Stock Indices of Western Bloc Countries: A Case on Belgium and France. Ushus- Journal of Business Management, 18(3), 25–38.

Why Log Returns. (2011). Retrieved November 4, 2019, from

India-Indonesia Bilateral Brief. (n.d.). Retrieved November 10, 2019, from Ministry of external affairs website: https:// Portal/ ForeignRelation/Ind_Indonesia_N_2019.pdf

India and Indonesia relations. (n.d.). Retrieved November 10, 2019, from–Indonesia_relations

Reciprocity. (n.d.). Retrieved September 20, 2019, from https://

Saitia, B. (2015). Cointegration of Islamic Stock Indices: Evidence from Five ASEAN Countries. International Journal of Scientific & Engineering Research, 6(7), 1392–1405.

Hosoya, Y. (1977). On the Granger Condition for Non-Causality. Econometrica,Econometric Society, 45(7), 1735–1736.

Lütkepohl, H. (2007). New Introduction to Multiple Time Series Analysis. Springer Berlin Heidelberg.

Palachy, S. (n.d.). Inferring causality in time series data. Retrieved November 16, 2019,

Price, M. (1979). The characterization of instantaneous causality: A correction. Journal of Econometrics,10(2),253–256.

Utkepohl, Helmut, and Muller, M. (1994). Testing for Multi{Step Causality in Time Series. viewdoc/ download; jsessionid=9B54CB35E4F3AA6576B763E1DCFC5056?doi=




How to Cite

Soni, B., & Roy, S. (2020). Findriver- Driven Relationship among Shariah Compliant Indian and Indonesian Indices – An Empirical Evidence using Granger Causality. Ushus Journal of Business Management, 19(3), 1-23.