Purpose This paper aims to analyse the opportunity of an exclusive investment in the DJ Islamic indexes. The objective is to characterize the links between MENA region index with seven DJ Islamic indexes. Design/methodology/approach A co-movement analysis was conducted to assess whether there is a safe investment during crisis. The VECM verifies the existence of a long run association. The MGARCH-DCC characterizes the dynamic links. The wavelet coherence detects a correlation in a time-frequency domain, which is relevant to set up a diversification strategy based on investment horizons. Findings Despite the existence of a long run association between the Islamic indexes, diversification opportunities are present. The MGARCH-DCC results recommend including the USA, Canada and Emerging Markets indexes with the Mena index to get diversification benefits. The Wavelet coherence confirms these results for 0 to 16 days holding period and more than six-months’ investment horizons. Hence, MENA portfolio managers should not invest in Europe, UK and Emerging Markets indexes. Research limitations/implications This study focused only on the bivariate correlation analysis without taking into consideration multivariate relationships. Future research should use multiple wavelet coherence and explore S&P Shariah indexes. Practical implications This work is important for investors searching for assets governed by sharia rules, who reject resorting to conventional markets, and policy makers dealing with coordination costs. They would be able to formulate strategies based on the different indexes’ relationships. Originality/value This paper enriches the limited stream of literature focusing only on Islamic indexes. Due to the important development of Islamic Finance in each MENA country, the authors shed the light on this Region’s index.

Purpose This paper aims to investigate the financial uncertainty vary according to different financial assets type: conventional and Islamic. Design/methodology/approach Common factors are related to risk or known information. For this, the authors use general dynamic factor model to extract common variation between both types of indexes. Then they calculate stochastic volatility for each idiosyncratic component. They also carry out the study on three different family indexes respectively, Dow Jones, S&P and MSCI indexes, for the period going from January 1, 2008 to June 30, 2018. Through a comparison analysis with uncertainty index designed for conventional assets, the authors examine the similarity between the two indexes via mean, median and variance tests. They decrypt the interrelation between them by using OLS linear regression, vector autoregressive model. Findings The findings show that Islamic assets uncertainty is different from conventional uncertainty level. This difference can be due to the Shariah screening and the prohibition of gharar. The main findings suggest that Islamic financial uncertainty is lower than conventional one. The OLS results prove that conventional financial uncertainties have no impact on their Islamic counterparts. In addition, Islamic financial uncertainty appears to have no significant influence on conventional one exception for Dow Jones pair. Overall, the findings support the decoupling hypothesis in term of uncertainty only for SP and MSCI indexes. Practical implications Risk averse investors can find their claim in Shariah-compliant assets, as it offers a low level of financial uncertainty. A portfolio manager may benefit from the long run non-association in uncertainty between Islamic and conventional assets especially in time of crisis. Originality/value In this work, the authors measured financial uncertainty differently and take into account the specific features of each index type to improve the results quality.

PurposeThis study examines co-movements between global Islamic index and heterogeneous rated/maturity sukuk. It tests the impact of financial uncertainty on these movements.Design/methodology/approachFirstly, we conduct a bivariate wavelet analysis to assess the co-movements between stocks and sukuk indexes. Secondly, we use General dynamic factor model and stochastic volatility to construct financial uncertainty index from Islamic stock indexes. Finally, we run regression analysis to determine the impact of uncertainty on the obtained correlations.FindingsOur results suggest the absence of flight to quality phenomenon since correlations are positive especially at a short investment horizon. There is evidence of contagion phenomena across assets. Financial uncertainty may be considered as a determinant of stock-sukuk co-movements. Our results show that a rise in financial uncertainty induces correlation to move in the opposite direction in the short term, (exception for correlation with AA-Rated sukuk). However, the sign of stock market uncertainty becomes positive in the long term, which leads sukuk and stocks to move in the same direction (exception for 1–3 Year and AA Rated sukuk).Practical implicationsInvestors may combine sukuk with 1–3 Year maturity and AA Rated when considering long holding periods. Further, all sukuk categories provide diversification benefit in time high financial uncertainty expectation for AA Rated sukuk when considering short holding periods.Originality/valueTo the best of our best knowledge, our study is the first investigation of the impact of financial uncertainty on Stock-sukuk co-movements and provides recommendation considering sukuk with different characteristics.