Zaidi Isa

Islamic banks: Contrasting the drivers of customer satisfaction on image, trust, and loyalty of Muslim and non-Muslim customers in Malaysia

Purpose – The purpose of this study is to investigate customer satisfaction and its effect on image, trust, and customer loyalty for Islamic banks. Design/methodology/approach – The study uses data from Islamic banks and dual‐window Islamic banks, pertaining to two different customer segments (Muslims and non‐Muslims). Findings – The results indicate that customer satisfaction has a significant relationship with image, image has a significant relationship with trust, and trust has a significant relationship with customer loyalty for both customer segments. Furthermore, significant differences occur in the effect of customer satisfaction on image, image on trust, and trust on customer loyalty between Muslim and non‐Muslim customers. Practical implications – The findings suggest that Muslim customers establish relationships with Islamic banks because they trust that Islamic banks are Shariah compliant. Therefore, providing secure banking products that are fully compliant with Islamic principles are necessary. Originality/value – This research is important as it clearly demonstrates that the loyalty of Muslim and non‐Muslim customers to Islamic banks is influenced by customers being satisfied, as well as the image of and trust in Islamic banks. In this context, when customers are unwilling to trust Islamic banks, they are also unwilling to be loyal.

Initial performance of new issues of shares in Malaysia

This paper presents the levels of under-pricing for new issues in a developing country, Malaysia, over a more recent period, January 1990-December 1998, than reported in prior studies. Three types of new issues were examined, namely public issue, offer for sale and combination or hybrid of offer for sale and public issue. Comparisons of initial return between types of new issues and between different board of listing were made. The results of independent t -tests for difference in mean initial returns indicate that, in general, there are significant differences in mean initial returns between types of new issues and between boards of listing. The results of step-wise regression reveal that on average, only over-subscription ratio contributes significantly to the initial returns. However, caution should be taken when interpreting the models formed because the Durbin-Watson rest indicate that some models are not free from problem of auto-correlation of the residuals.

The role of customer satisfaction in enhancing customer loyalty in Malaysian Islamic banks

This study examines the role of customer satisfaction in enhancing the loyalty of Muslim and non-Muslim customers in the Malaysian Islamic banking industry. Respondents are the customers (Muslim and non-Muslim customers) visiting the bank counters and have an account with Islamic banks. A total of 660 questionnaires were distributed, and 440 were returned. The results indicate that customer satisfaction has a statistically significant positive effect on customer loyalty and intentions to switch for Muslim and non-Muslim customers. However, there were significant differences in the effects of customer satisfaction on customer loyalty and intention to switch for Muslim and non-Muslim customers. The effect of customer satisfaction on customer loyalty and intention to switch is greater for the non-Muslim than the Muslim customers.

Modeling The Interactions Of Stock Price And Exchange Rate In Malaysia

After the East Asian crisis in 1997, the issue of whether stock prices and exchange rates are related or not have received much attention. This is due to realization that during the crisis the countries affected saw turmoil in both their currencies and stock markets. This paper studies the non-linear interactions between stock price and exchange rate in Malaysia using a two regimes multivariate Markov switching vector autoregression (MS-VAR) model with regime shifts in both the mean and the variance. In the study, the Kuala Lumpur Composite Index (KLCI) and the exchange rates of Malaysia ringgit against four other countries namely the Singapore dollar, the Japanese yen, the British pound sterling and the Australian dollar between 1990 and 2005 are used. The empirical results show that all the series are not cointegrated but the MS-VAR model with two regimes manage to detect common regime shifts behavior in all the series. The estimated MS-VAR model reveals that as the stock price index falls the exchange rates depreciate and when the stock price index gains the exchange rates appreciate. In addition, the MS-VAR model fitted the data better than the linear vector autoregressive model (VAR).

Modelling financial observable-volatility using long memory models

This article proposes a generalized long persistence observable volatility model which comprises of leverage effect autoregressive fractionally integrated moving average model with time-varying volatility and the inclusion of heterogeneous autoregressive components as the contemporaneous variables. Our empirical results found that the proposed model provides substantial improvement in the model fitting as well as specification.

Adjusted Hurst exponent evaluations for equity and energy markets

Abstract This study introduced an alternative method in long memory volatility financial time series evaluation using the autoregressive conditional heteroscedasticity models. Instead of direct measurement for long memory Hurst exponent parameter, this approach suggested a short memory filtering procedures using the conditional heteroscedastic specification. The stationary time series which is free from short memory is later evaluated using two heuristic long memory estimations. It is found that this method is able to eliminate the possible spurious long memory in the selected equity and energy markets. The findings of this study are important in long memory estimation and market efficiency analysis.

Bivariate value-at-risk in the emerging Malaysian sectoral markets

Abstract This study examines the transmission of price changes and volatility among the Malaysian economic barometer (FTSE Bursa Malaysia Kuala Lumpur Composite Index- FBMKLCI) and four sectoral markets after the Asian financial crisis. The preliminary structural break identification provides an optimal sample size for the cross-markets transmission mechanism analysis. In order to reveal the hidden intention of interactions among the sectoral markets, the pair-wise markets which consist of CI-IND, CI-PLN, CI-PRP and CI-FIN are evaluated using a bivariate asymmetric BEKK model. The major intention of this study focuses on the cross-market hedging and market risk evaluations in terms of shocks and volatility.

The Stylized Facts and Market Risk Evaluations of Malaysian Shariah Index

Abstract This study investigates some interesting empirical stylized facts in the Malaysian Shariah index. These included the clustering volatility, leverage effect, fat-tailed behavior, long memory property and flexible power volatility representation. A conditional heteroscedasticity model is used to capture all the stylized facts. The stylized facts for Shariah index is compared with the major barometer indicators such as FTSE-KLCI, Singapore Strait-time index (STI) and Indonesian Jakarta Stock Exchange (JSE). The results of the analysis are used in quantifying the market risk using the value-at-risk approach.

A new higher moment portfolio optimisation model with conditional value at risk

Variance is a common risk measure used for constructing portfolios. However, variance strictly depends on the assumptions that the returns of assets are not normally distributed or investor’s function is quadratic. Moreover, variance not only penalises the downside deviations below the mean return but also the upside deviation, variance, thus, does not match investor’s desire to maximise the upside deviation and minimise the downside deviation. The objective of this paper is to propose a new four moment mean-conditional-value-at-risk-skewness-kurtosis model and empirically test the model. In this proposed model, variance is replaced with conditional value at risk as the risk measure. The polynomial goal programming method is used in this study as it is flexible to incorporate different degree of investor’s preference on mean, skewness and kurtosis. Results of this study demonstrate that the mean-CVaR-skewness-kurtosis model gives higher mean return and skewness and provides better performance than the mean-variance-skewness-kurtosis model for all combinations of degree of preferences. This implies that CVaR is a better risk measure than variance in portfolio optimisation.

Measuring and forecasting Malaysian composite index volatility under the impact of Asian financial crisis - A revisit

Abstract This study revisited the impact of Asian Financial crisis to the Malaysian stock market. A generalized Tse’s model is used to depict various empirical stylized facts that occurred in the pre-and post-crisis periods. By utilizing the intraday volatility as the ex post of actual volatility, various forecasts horizons one-day ahead volatility are evaluated under six loss functions and regression analysis. It is found that the pre-crisis exhibited deeper impact of leverage effect, however less persistence volatility than the post-crisis period. The empirical results also shown that the asymmetric long memory model provided superior performance in the estimation as well as out-of-sample forecasts.