The purpose of this study is to investigate the return connectedness in the median, left, and right tail, using the novel methodology of quantile-based connectedness proposed by Ando et al. (2018). ...We use daily data covering the period from 1 January 2013 to 27 October 2020, which includes different financial crises occurring in GCC, Turkey, Malaysia, and Indonesia. Furthermore, analysing the dynamic connectedness, the Sukuk market was significantly influenced by the COVID-19 pandemic. Our findings reveal that the spillover structures in both upper and lower tails differ from those observed in the middle quantile. Finally, we find that Bahrain, Malaysia, Oman, and Qatar transmitted more spillovers than they admitted during the COVID-19 outbreak. These findings offer vital implications for regulators and policymakers, investors, traders, and portfolio managers regarding whether diversification across Sukuk indices is achievable during turbulent periods like COVID-19.
Even though numerous studies have looked at the spillover effects in Shari'ah compliant equity returns, little attention has been paid to exploring global shocks' transmission to the sukuk (Islamic ...Bond) returns. Our paper attempts to fill this void by quantifying spillovers from developed countries on the sukuk returns of Islamic countries. In this paper, we create sukuk indices for financial and non-financial companies on country basis and, examine the global linkages with those sukuk indices. We have found that global sukuk markets affect the sukuk indices at different levels. A clear distinction would be that global sukuk markets have a substantial impact on the spillovers of the sukuk issued by financial corporations, while sukuk issued by non-financial corporations are more affected by the overall spillover effect the sukuk markets than spillovers from the global Islamic bond markets. Sub-sample analysis during the COVID-19 pandemic yield interesting findings, show that spillover of returns on the sukuk issued by financial corporations during the COVID-19 pandemic was higher than the sukuk issued by non-financial corporations. These findings are mostly consistent for all markets included in our sample and evidently, urge portfolio holders to make clear distinctions between sukuk issued by financial and non-financial corporations.
Using the quantile connectedness approach for the median, lower, and upper quantiles, we examine the return and volatility connectedness between energy and BRIC markets from January 1, 2000, to July ...9, 2021. We find that uncertain economic activity and intense periods characterize energy and BRIC market returns and volatility connectedness. A parallel return and volatility connectedness structure for upper and lower quantiles against the average quantile revealed different results. Time-varying features are substantiated between energy and BRIC markets; significant distress events, such as the Global Financial Crisis, European Debt Crisis, Shale Oil Revolution, and COVID-19 pandemic, intensified spillovers. We highlight diversification avenues for energy and BRIC markets given the periods of financial turmoil, with investors’ concerns widely addressed by opt-in investment opportunities with lower risk and greater diversification. Our study has beneficial implications for policymakers, regulators, investors, and financial market constituents to redevelop their existing strategies to avoid financial losses.
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•Median and extreme return and volatility connectedness between energy and BRIC markets.•Comparative analysis of connectedness during GFC, SOR and COVID-19.•Results support significant connectedness across markets.•Connectedness is strengthened during crises and COVID-19 has the highest impact.•Diversification avenues of energy and BRIC markets given turmoil periods.
This study explores the impact of the Russian–Ukraine war on the hospitality equity sector market for the selected 26 countries. It reveals a sharp spike in the return connectivity at the onset of ...the war. The return of the sector materializes more sensitivity when tourism demand from Russia and Ukraine is more extensive and when a country has a higher energy dependency on Russia. Overall results consistently stipulate the aspect of the efficient market hypothesis.
In this paper, we investigate spillovers from regional and global equity markets to sectoral equity indices for several different regions/countries. First, we investigate the connectedness of ...sectoral equity return spillovers and explore the different patterns and magnitudes of spillovers. Next, we look for the determinants of sectoral equity return spillovers. We find the regional and global markets spillovers on sector equity indices are highly dispersed across different markets. Novel to the literature, we examine the liquidity and financial positions of the sectors and find that sector positions are highly influential in explaining the extent of the spillovers. Particularly, our exploration evidence that regional and global spillovers to specific sector equity markets jump significantly when a sector has higher debt and lower interest expense coverage. Similarly, higher profit margins of the sector make it less vulnerable to global and regional shocks. We also find market capitalization of the sectors inversely affects the extent of the spillovers originating from global and regional markets.
With the large expansion of Islamic finance in the recent years, sukuks (Islamic bonds), which are the Shariah-compliant substitute to conventional bonds, are now becoming more prominent. Although ...there are numerous studies that have looked at the impact of global shocks on conventional bond spreads, little attention has been paid to explore the effect of the global shocks to the sukuk spreads. This study's objective was thus to examine the impact of factors affecting the conventional bond and sukuk markets, including financial factors, economic policy uncertainty, U.S. and EU macroeconomic news, using an ordinary least squares approach. The results indicated that for regions and countries such as the GCC (Gulf Cooperation Council), Malaysia, Indonesia, Turkey, and Singapore, global shocks play a vital role in explaining sukuk spreads. Furthermore, employing a matched sample featuring firms from these regions and countries revealed that European and U.S. macroeconomic announcements and economic policy uncertainty have a significantly greater impact on sukuk spreads than on conventional bond spreads.
The study investigates the return spillovers across 20 Islamic and 34 conventional banks among GCC markets (UAE, Saudi Arabia, Bahrain, Qatar, Kuwait) over the period 2005-2022 based on Dieobold and ...Yilmaz (2014) and Barunik and Krehlik (2018) methods. The outcomes interestingly reveal that the spillover between markets is time-varying, asymmetric, and crisis-sensitive. Moreover, short-oriented spillovers dictate the long-oriented spillovers, while long-oriented spillovers establish the major chunk of the total return spillovers. The results of the DY and BK approach show a weak connectedness between all Islamic banks rather than conventional banks of GCC. Subsample analysis of COVID-19 and GFC strengthens the total and short-oriented spillovers more than long-term spillovers. The global financial stress is exposed with the most substantial coherence, increasing the connectedness of Islamic banks in the short and long-oriented markets compared to conventional banks. The results of the study have practical implications for bankers, central banks, Islamic banks, policymakers, international economic institutions, banking investors, FIIs, DIIs, and academia. Additionally, the current findings can be guiding forces for many investors across the world to take their portfolio decision by leveraging Islamic banks' securities.
Purpose
This study aims to examine the hedge and safe-haven properties of the Sukuk and green bond for the stock markets pre- and during the COVID-19 pandemic period.
Design/methodology/approach
To ...test the hedge and safe-haven characteristics of Sukuk and green bonds for stock markets, the study first uses the methodology proposed by Ratner and Chiu (2013). Next, the authors estimate the hedge ratios and hedge effectiveness of using Sukuk and green bonds in a portfolio with stock markets.
Findings
Strong safe-haven features of ethical (green) bonds reveal that adding green bonds into the investment portfolios brings considerable diversification avenues for the investors who tend to take fewer risks in periods of economic stress and turbulence. The hedge ratio and hedge effectiveness estimates reveal that green bonds provide sufficient evidence of the hedge effectiveness for various international stocks.
Practical implications
The study has significant implications for faith-based investors, ethical investors, policymakers and regulatory bodies. Religious investors can invest in Sukuk to relish low-risk and interest-free investments, whereas green investors can satisfy their socially responsible motives by investing in these investment streams. Policymakers can direct the businesses to include these diversifiers for portfolio and risk management.
Originality/value
The study provides novel insights in the testing hedge and safe-haven attributes of green bonds and Sukuk while using unique methodologies to identify multiple low-risk investors for investors following the uncertain COVID-19 pandemic.
Investors seek safe haven assets for portfolio diversification and risk management because climate change and environmental markets have recently become the concern of many governments, companies, ...households, politicians and academics. Therefore, this study examines the dynamic connectedness between sukuk (Islamic bonds), green sukuk, Islamic equities, and Islamic green markets for equity by comparing both in the short and long terms spillover and examining the effects of uncertainty factors on dynamic connectedness at different spillover horizons. In the short run, green Islamic equities, green sukuk and sukuk are net transmitters, and Islamic equities are net receivers. However, in the medium and long term, the behavior of these markets is vice versa. We then find the determinants of connectivity levels using macroeconomic conditions. We find that some of the determinants that cause return spillover in the short and medium term are quite different from those that cause return spillover in the long term. The results of portfolio analysis show that green sukuk are effective in hedging the risks of Islamic equities, green Islamic equities and sukuk. The performance characteristics of these potential diversification and risk mitigation benefits have been robust and enduring during the Covid-19 pandemic and the Russia-Ukraine War. Finally, our findings are of great importance to investors interested in ethical investing and for policymakers to maintain a healthy and resilient financial system.
•Dynamic Connectedness Shift: The study uncovers short-to-long-term shifts in dynamic connectedness among sukuk, green sukuk, Islamic equities, and Islamic green markets.•Macroeconomic Determinants: Distinct macroeconomic factors shape return spillover in the short, medium, and long terms, enriching our understanding of connectivity levels.•Green Sukuk's Risk Mitigation: Portfolio analysis spotlights green sukuk's efficacy in hedging risks tied to Islamic equities, green Islamic equities, and sukuk, showing resilience amid the Covid-19 pandemic and the Russia-Ukraine War.•Global Event Resilience: Green sukuk consistently exhibits robust performance, showcasing resilience during significant global events.•Investor and Policymaker Implications: Crucial for ethical investors, the findings offer diversification insights and guide policymakers in fostering a resilient financial system.
