Co-movement between sharia stocks and sukuk in the GCC markets: A time-frequency analysis

Aloui, Chaker; Hammoudeh, Shawkat; Hamida, Hela Ben

doi:10.1016/j.intfin.2014.11.003

Cited by 104 publications

(60 citation statements)

References 18 publications

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“…The GCC sukuk and commodity pairs exhibit an average negative dynamic conditional correlation between these assets. This result is consistent with the study of Aloui et al (2015), which provided evidence of negative dynamic correlation between sukuk and Sharia-compliant stocks in GCC countries. From the DCC plots, we notice that the patterns of the DCC values differ from one pair to another.…”

Section: Estimation Resultssupporting

confidence: 92%

Exploring the Dynamic Links between GCC Sukuk and Commodity Market Volatility

Naifar

2018

IJFS

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This study investigates the impact of commodity price volatility (including soft commodities, precious metals, industrial metals, and energy) on the dynamics of corporate sukuk returns. Using a sample of sukuk indices from Gulf Cooperation Council (GCC) countries, we study the dynamic conditional correlation using a multivariate generalized autoregressive conditional heteroskedasticity dynamic conditional correlation (GARCH-DCC) process. Empirical results show a time-varying negative correlation between GCC sukuk returns and commodity prices. In fact, a negative conditional correlation among assets of a given portfolio implies higher gain-to-risk ratios. An understanding of volatility and dynamic co-movements in financial and commodity markets is important for portfolio allocation and risk management practices.

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Section: Estimation Resultssupporting

confidence: 92%

Exploring the Dynamic Links between GCC Sukuk and Commodity Market Volatility

Naifar

2018

IJFS

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“…For example, Rua and Nunes (2009), Kiviaho et al (2014), and el Alaoui et al (2015) apply wavelet squared coherency to analyze international co-movement of stock market returns. Kim and In (2007) apply wavelet analysis to examine the relationship between changes in stock prices and bond yields in G7 countries, while Aloui et al (2015) utilize wavelet approach to examine co-movement between Islamic stocks and bonds in the Gulf Cooperation Council (GCC) countries. 2 The true long-term relationship between stock and bond returns can be altered in a short horizon due to short-term noise: investors' immediate consumption needs and portfolio optimization (see Harrison and Zhang, 1999).…”

Section: Introductionmentioning

confidence: 99%

Impact of financial market uncertainty and macroeconomic factors on stock–bond correlation in emerging markets

Dimic

Kiviaho

Piljak

et al. 2016

Research in International Business and Finance

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“…To the best of our knowledge, this is the first paper assessing co‐movements between Islamic bonds and conventional stocks, in spite of being already part of the literature on portfolio diversification (Campbell & Ammer, 1993; Keim & Stambaugh, 1986; Kwan, 1996). Few papers explore co‐movements between different Islamic assets (Aloui, Hammoudeh, & Hamida, 2015a, 2015b), or analyze cointegration in Islamic stock markets (Majid, Yusof, & Razal, 2007; Marashdeh, 2005). Few others investigate diversification benefits of Shariah compliant stocks or indexes when compared to conventional ones (Achsani, Effendi, & Abidin, 2007; Karim, Kassim, & Arip, 2010; Majid, Meera, Omar, & Aziz, 2009).…”

Section: Introductionmentioning

confidence: 99%

Dynamic correlations and volatility linkages between stocks and sukuk: Evidence from international markets

et al. 2016

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a b s t r a c t a r t i c l e i n f oAvailable online xxxxAn understanding of volatility and co-movements in financial markets is important for portfolio allocation and risk management practices. The current financial crisis caused a shrinkage in values of most assets, an increased volatility and a threat to the survival of several institutional investors. Managing risks and returns within the classic portfolio theory, when correlations across securities soar, is increasingly challenging. In this paper, we investigate the volatility behavior and the co-movements between sukuk and international stock indexes. Symmetric multivariate GARCH models with dynamic conditional correlations (DCC) were estimated under Student-t distribution. We provide evidence of high correlations between sukuk and US and EU stock markets, without finding the well-known flight to quality behavior affecting Islamic bonds. We also show that volatility linkages between sukuk and regional market indexes are higher during financial crisis. We argue that investors could obtain diversification benefits including sukuk in a well-diversified equity portfolio, given their lower volatility compared to equity. But higher volatility linkages and dynamic correlations during financial crises show that they are hybrid instruments between bonds and equity. Our findings are relevant for institutional investors and asset managers that include Islamic bonds in a diversified portfolio.

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Co-movement between sharia stocks and sukuk in the GCC markets: A time-frequency analysis

Cited by 104 publications

References 18 publications

Exploring the Dynamic Links between GCC Sukuk and Commodity Market Volatility

Exploring the Dynamic Links between GCC Sukuk and Commodity Market Volatility

Impact of financial market uncertainty and macroeconomic factors on stock–bond correlation in emerging markets

Dynamic correlations and volatility linkages between stocks and sukuk: Evidence from international markets

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