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Sukuk securities and conventional bonds: evidence of significant differences

Sukuk securities have similar features with conventional bonds. The financial press has, however, inappropriately referred to Sukuk as Islamic bonds. This paper investigates sukuk securities empirically by first examining the yields to maturities of sukuk securities and conventional bonds of various...

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Main Authors: Ariff, Mohamed, Safari, Meysam, Ramadilli Mohd, Shamsher Mohamad
Format: Article
Language:English
Published: Universiti Putra Malaysia Press 2013
Online Access:http://psasir.upm.edu.my/id/eprint/40739/1/Sukuk%20Securities%20and%20Conventional%20Bonds%20Evidence%20of%20Significant%20Differences.pdf
http://psasir.upm.edu.my/id/eprint/40739/
http://www.pertanika.upm.edu.my/Pertanika%20PAPERS/JSSH%20Vol.%2021%20(2)%20Jun.%202013/15%20Page%20621-638.pdf
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spelling my.upm.eprints.407392015-10-30T01:05:44Z http://psasir.upm.edu.my/id/eprint/40739/ Sukuk securities and conventional bonds: evidence of significant differences Ariff, Mohamed Safari, Meysam Ramadilli Mohd, Shamsher Mohamad Sukuk securities have similar features with conventional bonds. The financial press has, however, inappropriately referred to Sukuk as Islamic bonds. This paper investigates sukuk securities empirically by first examining the yields to maturities of sukuk securities and conventional bonds of various issuers and maturities. Tests of differences in performance of the two classes of securities and Granger causality tests substantiate that these securities are different. This paper identifies some significant differences between the yield curves of sukuk securities and those of conventional bonds of the same issuers for the same term and rating. Results show significant differences between the average yields of sukuk and those of conventional bonds with the same quality and term issued by the same issuers from 2005 to 2012. Granger causality tests confirm that the yields of bonds do not Granger-cause the yields of sukuk, verifying no causality between the two. There is strong empirical evidence that the two types of debt instruments are not the same. This prompts re-examination of investment advisory and valuation methodology currently applied in the sukuk industry of 11 capital markets. Universiti Putra Malaysia Press 2013 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/40739/1/Sukuk%20Securities%20and%20Conventional%20Bonds%20Evidence%20of%20Significant%20Differences.pdf Ariff, Mohamed and Safari, Meysam and Ramadilli Mohd, Shamsher Mohamad (2013) Sukuk securities and conventional bonds: evidence of significant differences. Pertanika Journal of Social Sciences & Humanities, 21 (2). pp. 621-638. ISSN 0128-7702; ESSN: 2231-8534 http://www.pertanika.upm.edu.my/Pertanika%20PAPERS/JSSH%20Vol.%2021%20(2)%20Jun.%202013/15%20Page%20621-638.pdf
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
description Sukuk securities have similar features with conventional bonds. The financial press has, however, inappropriately referred to Sukuk as Islamic bonds. This paper investigates sukuk securities empirically by first examining the yields to maturities of sukuk securities and conventional bonds of various issuers and maturities. Tests of differences in performance of the two classes of securities and Granger causality tests substantiate that these securities are different. This paper identifies some significant differences between the yield curves of sukuk securities and those of conventional bonds of the same issuers for the same term and rating. Results show significant differences between the average yields of sukuk and those of conventional bonds with the same quality and term issued by the same issuers from 2005 to 2012. Granger causality tests confirm that the yields of bonds do not Granger-cause the yields of sukuk, verifying no causality between the two. There is strong empirical evidence that the two types of debt instruments are not the same. This prompts re-examination of investment advisory and valuation methodology currently applied in the sukuk industry of 11 capital markets.
format Article
author Ariff, Mohamed
Safari, Meysam
Ramadilli Mohd, Shamsher Mohamad
spellingShingle Ariff, Mohamed
Safari, Meysam
Ramadilli Mohd, Shamsher Mohamad
Sukuk securities and conventional bonds: evidence of significant differences
author_facet Ariff, Mohamed
Safari, Meysam
Ramadilli Mohd, Shamsher Mohamad
author_sort Ariff, Mohamed
title Sukuk securities and conventional bonds: evidence of significant differences
title_short Sukuk securities and conventional bonds: evidence of significant differences
title_full Sukuk securities and conventional bonds: evidence of significant differences
title_fullStr Sukuk securities and conventional bonds: evidence of significant differences
title_full_unstemmed Sukuk securities and conventional bonds: evidence of significant differences
title_sort sukuk securities and conventional bonds: evidence of significant differences
publisher Universiti Putra Malaysia Press
publishDate 2013
url http://psasir.upm.edu.my/id/eprint/40739/1/Sukuk%20Securities%20and%20Conventional%20Bonds%20Evidence%20of%20Significant%20Differences.pdf
http://psasir.upm.edu.my/id/eprint/40739/
http://www.pertanika.upm.edu.my/Pertanika%20PAPERS/JSSH%20Vol.%2021%20(2)%20Jun.%202013/15%20Page%20621-638.pdf
_version_ 1643832802091728896
score 13.211869

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