The impact of Coronavirus (COVID-19) outbreak on faith-based investments: An original analysis

Abstract

This paper examines the rapid spread of Coronavirus (COVID-19) and its short-term impact on the Shariah-compliant UK Dow Jones market index to capture the dynamic behavior of stock returns at economy and industry levels. Using daily data over the period January 20 to May 20 and ten UK industrial sector groupings, the findings suggest a strong and statistically significant relationship between the COVID-19 pandemic and the performance of the conventional stock market index. The findings also suggest that the disease interacts negatively but insignificantly with the Dow Jones faith-based ethical (Islamic) index compared to its UK counterpart. In addition, through an analysis of sector groupings, the paper shows that the stock returns of the information technology sector performed significantly better than the market, while stock returns of consumer discretionary sector, which includes transportation, beverages, tourism and leisure, consumer services performed significantly worse than the market during the COVID-19 outbreak. Other sector groupings fail to yield significantly plausible parameter values.

Predicting financial market returns in the presence of health crisis: evidence from conventional and Islamic stock markets

“…However, negative COVID-19 case news (such as the increase in the number of cases) has a negative and statistically significant effect on all sectoral stock returns in conventional financial markets. This result is similar to Zhang et al (2020), Al-Awadhi et al (2020, Sherif (2020) and Baig et al (2021).…”

“…In general, the COVID-19 outbreak causes volatility increases in the world's financial markets due to the increasing ambiguity. Sherif (2020) examined the effect of the spread rate of coronavirus on conventional and Islamic stock markets in the U.K. According to the results, while the spread rate of coronavirus is statistically significant and strongly negative in conventional stock markets, this relationship is negative but statistically insignificant in Islamic stock markets.…”

Capturing the Performance of Indonesian Sharia Stock Index (ISSI) and Composite Share Price Index (IHSG) Jakarta Period 2016-2019

“…Robiyanto, (2018) found that gold can serve as a safe haven asset for sharia stocks in Indonesia at thet extreme shocks occur in the Indonesian stock market. Sherif, M. (2020) found a strong and statistically significant relationship between the COVID-19 pandemic and the performance of the conventional stock market index. Vol.…”

The Response of Islamic Financial Service to the COVID-19 Pandemic: The Open Social Innovation of the Financial System

“…During the last four decades, many sharia-compliant financial products and have been introduced all around the globe by Islamic financial institutions [69-71 products have been introduced in areas of consumer finance, investment banking, ing of poor and needy, venture capital and SME financing [72,73]. These produ services offered by the Islamic financial institutions are equity-based modes of fin such as Musharakah, Diminishing Musharaka and Mudrabaha, and asset-backed fin such as Murabaha, Ijarah, Istisna, Salam and Istisna [74,75]. Some other popular f services include Qardh-Al-Hasan, Bay-Al-Sarf and Agency.…”