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Abstract
The current research investigates the Islamic capital market resiliency and stability using Islamic and conventional markets indices analysis for each individual country. The empirical study observes the impact of the variables of interest on both Islamic and conventional capital market indices{u2019} performance for the studied countries. Since Islamic capital market tools have a different business model and stocks that comply with shari’ah principals avoid leveraged assets such as sell of debt (except at par value), hedging conventional mechanisms (specific conditions for Islamic derivatives), and prohibiting short selling and margin trading. Then, it is expected to realize different patterns of both risk and return. The study aims at assessing the implementation of Islamic markets Instruments, by comparing the performance of the two groups, Islamic and conventional capital markets indices, in 10 countries where a big segment of both Islamic and conventional finance is applied. The empirical research also puts the accent on variables that may affect the volatility of the Islamic vs. conventional indices. Using ARCH and EGARCH volatility models, two key factors are used to compare both Islamic and conventional markets indices{u2019} volatility, which are: interest rates and exchange rates. Empirical findings reported fragmented results according to each individual country conditions and market dynamics, so that we cannot totally accept or reject the hypothesis stating that Islamic capital markets are less volatile, particularly in a crisis period. This is due to many reasons per each case, whether the market development, the diversification of available Islamic instruments, the economic conditions and fundamentals, or the integration with regional and international markets. At last, the model may be used in future researches as factors affecting capital market volatility. In addition, the current research formulates a comprehensive operational framework to promote Islamic Capital Markets in Egypt.