Volatility Spillover during the Covid-19 Crisis: A Comparative Comparison between Islamic and Conventional Financial Instruments

Document Type : Scientific paper

Authors

1 University of Mazandaran

2 PhD student of Islamic economics, Faculty of Economic and Administrative Sciences, University of Mazandaran, Mazandaran, Iran.Babosar,Mazandaran,Iran.

3 , Department of Economics, Faculty of Economic and Administrative Sciences, University of Mazandaran, Babolsar,Mazandaran

4 Economics, Faculty of Economic and Administrative Sciences, University of Mazandaran,Babolsar, Mazandaran, Iran.

Abstract

in recent years, as the trend of globalization and integration of markets has accelerated, the relationship between markets, especially financial markets, has intensified, as the spillover of volatility in financial markets in times of crisis has become the concern of many investors. this issue is weighted, investors are more important for risk management and selection of optimal portfolio of assets, checking volatility, return of assets and volatility spillover. in this study, the severity of financial assets, especially Islamic stock markets and conventional stocks, before and after the Covid - 19 crisis was estimated by using oil price data, gold, Islamic stock and conventional stock and VRMA-BEKK-AGARCH model. the results show a relative increase in turbulence and shock spillover in the post Covid - 19 period compared to the previous period. the results also show mutual and mutual shock and turbulence spillover between all indicators in the post - corona sample period. although the return on debt during the whole period and the two sub periods has significantly less volatility than its conventional counterpart, the Islamic stock index (SUKUK) as well as conventional bonds has been affected by the volatility spillover in the Covid - 19 crisis and there has been no difference of debt in the spillover between the two markets in the period under review.

Keywords

Main Subjects

References

Abdullahi, Sh. (2021). Islamic equities and COVID-19 pandemic: Measuring Islamic stock indices correlation and Volatility in period of Crisis, Islamic Economics Studies, 29(1), 50-66. http://dx.doi.org/10.1108/IES-09-2020-0037.
Alif, S. R., Rani. L. N., Swastika, P. & Zulaikha, S. (2020). Capital Market Volatility MGARCH Analysis: Evidence from Asia, Journal of Asian Finance, Economics and Business, Volume 7, Issue 11, pp: 117-126. http://dx.doi.org/10.13106/jafeb.2020.vol7.no11.117.
Amin Kharrazian, N., Aleemran, R., Baradaran Hasanzade, R. & Farhang, A. A. (2023).  Investigating the correlation between crude oil prices and the stock market in Iran: multivariate GARCH and wavelet approach, Quarterly Journal of Financial Economics, 17(64), 141-157. (In Persian). https://doi.org/10.30495/fed.2023.1937865.2498.
Arif, M., Naeem, M. A., Hasan, M., Alawi, S. & Taghizadeh, F. (2021). Pandemic Crisis Versus Global Financial Crisis: Are Islamic Stocks a Safe-Haven for G7 Markets? journal of Economic Research-Ekonomska Istrazivanja.
 https://doi.org/10.1080/1331677X.2021.1910532.
Ashraf, D., Rizwan, M. S., & Ahmad, G. (2022). Islamic Equity Investments and the COVID-19 Pandemic. Pacific-Basin Finance Journal, 73, 1-18.
 https://doi.org/10.1016/j.pacfin.2022.101765.
Alqaralleh, H & Abuhommous, A. (2021). Covid-19 Pandemic and Dependence Structures Among Oil, Islamic and Conventional Stock Markets Indexes, Journal of Asian Finance Economics and Business, 8, 5, pp: 1-9.
 https://www.researchgate.net/publication/350836548.
bavaghar, M., faghani, M., & Ranjbar, M. H. (2022). Spillover between OPEC oil Price and Equity Markets Considering Business Cycles and Structural Breakdown (Case study; GCC Countries and Iran). Journal of Investment Knowledge, 11(41), 195-218. (In Persian).
 https://sanad.iau.ir/fa/Journal/jik/DownloadFile/842147.
Belanes, A. Saadaoui, F., & Zoynul Abedin, M. (2024). Potential diversification benefits: A comparative study of Islamic and conventional stock market indexes, Research in International Business and Finance, 67, 1-12.
 https://doi.org/10.1016/j.ribaf.2023.102098.
Ben Haddad, H. and Trabelsi, N. (2021), Better Safe Havens During COVID-19: A Comparison Between Islamic and Selected Financial Assets, journal of Islamic Monetary and Finance, 7, 33-82.  https://doi.org/10.21098/jimf.v7i0.1343.
Engle, R. F., & Kroner, K. (1995). Multivariate Simultaneous Generalized ARCH. Econometric Theory, 11(1), 122-150 .
 https://doi.org/10.1017/S0266466600009063.
Engle, R. F. (2002). Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroscedasticity Models, Journal of Business & Economic Statistics, 20(2), 339-350.
https://doi.org/10.1198/073500102288618487.
Farooq, F., Sajid Ali, M. & Rashid, U. (2020), Co-Movement Between Sukuk, Conventional Bond and Islamic Stock Markets Under Bullish and Bearish Market Conditions: An Application of Quantile-One-Quantile Regression, Journal of Accounting and Finance in Emerging Evonomics, 6(3), 839-856. http://dx.doi.org/10.26710/jafee.v6i3.1390.
Hassani, A., & Entezar, E. (2019). The Investigating of Exchange Rate Volatility Impact on Stock Market Price Efficiency and Optimization of Investment Portfolio. Journal of Investment Knowledge, 8(31), 225-248. (In Persian). http://www.jik-ifea.ir/article_14774.html?lang=en
Kilic, Y. & Bugan, M. (2016). Are Islamic equity markets “Safe Havens”? Testing the Contagion Effect Using DCC-GARCH, International Journal of Academic Research in Accounting, Finance and Management Sciences,  6,  167-176.
DOI: 10.6007/IJARAFMS/v6-i4/2335.
Mensi, W., Al Kharusi, S., Vinh Vo, X. & Kang, S. H. (2020). Does Bitcoin Co-Move and Share Risk with Sukuk and World and Regional Islamic Stock Markets? Evidence Using a Time-Frequency Approach, Research in International Business and Finance, 53, 101230.
 DOI: 10.1016/j.ribaf.2020.101230.
Mousaviyan, S. A. (2011). Islamic Capital Market (1), second edition (2019), Tehran, Islamic Culture and Thought Research Institute Publications (In Persian).
Rehman, M. U., Saleem, A., & Sági, J. (2024). Oil crisis vs pandemic: a broader outlook of time-frequency volatility transmission between Islamic and conventional stock markets. Cogent Economics & Finance, 12(1), 2365366.
https://doi.org/10.1080/23322039.2024.2365366.
Rasekhi, S. & Khanalipour, A. (2009). Empirical analysis of stock market fluctuations and efficiency (case study: Tehran Stock Exchange), Iran Economic Research Quarterly, 13(20), 29-57 (In Persian).
 https://ijer.atu.ac.ir/article_3481_474f820d1f72ef74415cba2ca6a07a2c.pdf.
Razi Kazemi, S., Zamrian, Gh. & Chirani, E. (2021)..Volatility Spillover in the financial markets of Iran (Method of VAR-GARCH models).Financial Engineering and Portfolio Management, 46, 255-268 (In Persian).
 https://journals.iau.ir/article_681174_e9a93983198cadb22e9354f3004d2b41.pdf.
Tabash, M, I., Sahabuddin, M., Muhammad Abdulkarim, F., Hamouri, B. & Tran, D. K. (2023). Dynamic Dependency between the Shariah and Traditional Stock Markets: Diversification Opportunities during the COVID-19 and Global Financial Crisis (GFC) Periods, Economies 11(5), 149. https://doi.org/10.3390/economies11050149.
Yarovaaya, L., Elsayed, A. H. & Hammoudeh, SH. (2021). Determinants of Spillovers Between Islamic and Conventional Financial Markets: Searching for Safe Havens During the COVID-19 Pandemic, Finance Research Letters, 43, 1-11.
 https://doi.org/10.1016/j.frl.2021.101979.
Yosfi, M., Dhaoui, A. And Bouzgarrou, H. (2021). Risk Spillover During the COVID-19 Global Pandemic and Portfolio Management, Journal of Risk and Financial Management, 14(5), 222. http://dx.doi.org/10.3390/jrfm14050222.
Macroeconomics Research Letter
Volume 19, Issue 43
November 2025
Pages 125-148

Files

History

  • Receive Date: 19 August 2024
  • Revise Date: 20 October 2024
  • Accept Date: 30 October 2024

Share

How to cite

Statistics