There has been increasing interests in the sustainable way of investing as enjoined by several sustainability initiatives. However, investors require effective portfolio diversification at various market conditions (stress, benign, and boom) and would consider sustainable equities to the extent that they aid in the minimisation of portfolio risks. As a result, a better way investors can mitigate portfolio risk is by forming portfolios with relevant volatility indices as enshrined in extant literature. It becomes necessary to investigate the susceptibility of Islamic stocks in a sustainable way to shocks from volatility indices to enhance effective portfolio decisions. In this regard, we investigate the asymmetric effect of implied volatility indices on sustainable Islamic stocks across different market conditions. Hence, the quantile regression and quantile-on-quantile regression techniques are employed. The study discovered an asymmetric influence of volatility on sustainable Islamic stock returns at various quantiles. Furthermore, most volatilities’ asymmetric effects were generally inversely associated to sustainable Islamic stock returns, implying diversification benefits across market outcomes. Also, with the exception of the extreme quantiles, there is a causal effect of volatilities on Islamic stock returns for most quantiles. It seems to reason that ordinary market outcomes, rather than market stress or boom, have a greater impact on causal estimates for our quantile regression model.

We examine the time- and frequency-domain spillover connectedness between regional and world Shariah indices. The spillover index approach is employed with data over the period from April 30, 2012, to May 9, 2022, for African, American, Asian, European, and world emerging and developed markets’ Shariah-based equity indices. The results indicate significant time- and frequency-dependent spillovers between Shariah indices. The world and developed markets’ Shariah indices transmit the greatest return spillover to their African and Asian counterparts, which act as net recipients of system spillovers. Our findings show that Asian Shariah assets are a perfect hedge against all relevant market shocks over the last decade. Our findings have implications for Shariah market regulators, investors, practitioners, and policymakers.