Zaheer Anwer, Ferry Prasetyia
Purpose – This study aims to investigate whether Shariah-compliant (SC) and sin equities in Malaysia are interlinked by virtue of shared macroeconomic and market forces. It explores whether religious screening creates genuine market separation or whether both sectors remain connected through information, liquidity and sentiment channels. Design/methodology/approach – The analysis applies a time-varying parameter vector autoregression (TVP-VAR) model to the FTSE Bursa Malaysia EMAS Shariah Index (FBMS) and major listed sin stocks in alcohol, tobacco and gaming sectors. FBMS represents more than 70% of Kuala Lumpur Stock Exchange. Findings – The results indicate a moderate degree of integration between SC and sin equities. FBMS consistently transmits shocks to all sin stocks, reflecting its dominance in capturing systemic and policy-driven movements. Sin equities, however, occasionally emerge as transmitters during periods of strong firm performance or sectoral news, such as excise reforms or post-pandemic recovery, revealing short-term contagion reversals within the system. Originality/value – This paper provides evidence on time-varying spillovers between SC and sin equities in an emerging dual-market context. It highlights that moral and ethical segmentation does not imply financial isolation, as systemic shocks and liquidity cycles influence both sides of the market. © 2026 Emerald Publishing Limited
Department of Accounting, Finance and Economics, Sunway Business School, Sunway University, Sunway City, Malaysia; Department of Economics, Faculty of Economics and Business, Universitas Brawijaya, Malang, Indonesia
