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Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets

We examine the risk minimization utility of Islamic stock and Sukuk (bond) indices by studying their linkages against traditional global counterparts. We first employ an asymmetric power ARCH-based ADCC model on an extended dataset employed by Kenourgios et al. (2016). Our sample ranges from July 20...

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Main Authors: Sifat, Imtiaz, Mohamad, Azhar, Zhang, Hengchao, Molyneux, Philip
Format: Article
Language:English
Published: Routledge Taylor & Francis Group 2022
Subjects:
HB131 Methodology.Mathematical economics. Quantitative methods
HG3368 Islamic Banking and Finance
Online Access:http://irep.iium.edu.my/96692/7/96692_Reevaluating%20the%20risk%20minimization%20utility.pdf
http://irep.iium.edu.my/96692/
https://www.tandfonline.com/loi/rejf20
https://doi.org/10.1080/1351847X.2022.2032242
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spelling my.iium.irep.966922022-02-10T09:16:37Z http://irep.iium.edu.my/96692/ Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets Sifat, Imtiaz Mohamad, Azhar Zhang, Hengchao Molyneux, Philip HB131 Methodology.Mathematical economics. Quantitative methods HG3368 Islamic Banking and Finance We examine the risk minimization utility of Islamic stock and Sukuk (bond) indices by studying their linkages against traditional global counterparts. We first employ an asymmetric power ARCH-based ADCC model on an extended dataset employed by Kenourgios et al. (2016). Our sample ranges from July 2007 to June 2021 covering the Global Financial Crisis (GFC), the European Sovereign Debt Crisis (ESDC), and the COVID-19 pandemic. Econometric tests suggest strong evidence of coupling in the bulk of Islamic equity indices. A handful of emerging market indices constitute exceptions. Qualitatively similar results emerge from time–frequency analysis via wavelet tools, revealing pervasive coupling in both returns and volatility series. The linkages are scale-dependent in only a few pairs. In contrast, Sukuk indices are uncoupled from their global fixed income counterparts and relevant risky debt portfolios. In sum, the risk-return characteristics of Islamic equities (especially in developed economies) remain coupled to major global benchmarks and therefore are unlikely to appeal as safe haven candidates. The converse applies to Sukuk, which promises potential portfolio diversification benefits and safe haven status in ‘normal’ and crisis periods. Routledge Taylor & Francis Group 2022-02-05 Article PeerReviewed application/pdf en http://irep.iium.edu.my/96692/7/96692_Reevaluating%20the%20risk%20minimization%20utility.pdf Sifat, Imtiaz and Mohamad, Azhar and Zhang, Hengchao and Molyneux, Philip (2022) Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets. The European Journal of Finance. pp. 1-23. ISSN 1351-847X E-ISSN 1466-4364 (In Press) https://www.tandfonline.com/loi/rejf20 https://doi.org/10.1080/1351847X.2022.2032242
institution Universiti Islam Antarabangsa Malaysia
building IIUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider International Islamic University Malaysia
content_source IIUM Repository (IREP)
url_provider http://irep.iium.edu.my/
language English
topic HB131 Methodology.Mathematical economics. Quantitative methods
HG3368 Islamic Banking and Finance
spellingShingle HB131 Methodology.Mathematical economics. Quantitative methods
HG3368 Islamic Banking and Finance
Sifat, Imtiaz
Mohamad, Azhar
Zhang, Hengchao
Molyneux, Philip
Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets
description We examine the risk minimization utility of Islamic stock and Sukuk (bond) indices by studying their linkages against traditional global counterparts. We first employ an asymmetric power ARCH-based ADCC model on an extended dataset employed by Kenourgios et al. (2016). Our sample ranges from July 2007 to June 2021 covering the Global Financial Crisis (GFC), the European Sovereign Debt Crisis (ESDC), and the COVID-19 pandemic. Econometric tests suggest strong evidence of coupling in the bulk of Islamic equity indices. A handful of emerging market indices constitute exceptions. Qualitatively similar results emerge from time–frequency analysis via wavelet tools, revealing pervasive coupling in both returns and volatility series. The linkages are scale-dependent in only a few pairs. In contrast, Sukuk indices are uncoupled from their global fixed income counterparts and relevant risky debt portfolios. In sum, the risk-return characteristics of Islamic equities (especially in developed economies) remain coupled to major global benchmarks and therefore are unlikely to appeal as safe haven candidates. The converse applies to Sukuk, which promises potential portfolio diversification benefits and safe haven status in ‘normal’ and crisis periods.
format Article
author Sifat, Imtiaz
Mohamad, Azhar
Zhang, Hengchao
Molyneux, Philip
author_facet Sifat, Imtiaz
Mohamad, Azhar
Zhang, Hengchao
Molyneux, Philip
author_sort Sifat, Imtiaz
title Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets
title_short Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets
title_full Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets
title_fullStr Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets
title_full_unstemmed Reevaluating the risk minimization utility of Islamic stocks and bonds (Sukuk) in international financial markets
title_sort reevaluating the risk minimization utility of islamic stocks and bonds (sukuk) in international financial markets
publisher Routledge Taylor & Francis Group
publishDate 2022
url http://irep.iium.edu.my/96692/7/96692_Reevaluating%20the%20risk%20minimization%20utility.pdf
http://irep.iium.edu.my/96692/
https://www.tandfonline.com/loi/rejf20
https://doi.org/10.1080/1351847X.2022.2032242
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score 13.211869

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