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Sailing with the non-conventional stocks when there is no place to hide

A.S.M. Azad, Saad Azmat, Abdelaziz Chazi and Amirul Ahsan

Journal of International Financial Markets, Institutions and Money, 2018, vol. 57, issue C, 1-16

Abstract: This paper provides both theoretical and empirical support on how non-conventional (i.e., Islamic) stocks could act as a hedge during a tranquil environment and provide a shelter in times of a systematic economic and financial crisis. We build a three period model that focuses on Islamic equities’ financial filters, market wide liquidity and the role of Shariah conscious customers to show how Islamic stocks could provide a shelter during a financial crisis. We then offer empirical support by using quantile regressions to analyse the relation between conventional and non-conventional (i.e., Islamic) stock markets. Using major indices from around the world, we provide strong support for Islamic stocks as a hedge for majority of the markets under study suggesting that they offer a safe haven against most international markets. We suggest that during the major economic and financial crises, investors could use Islamic stocks to diversify their risks.

Keywords: Conventional stocks; Islamic stocks; Hedge; Safe haven; Financial crisis (search for similar items in EconPapers)
JEL-codes: G10 G11 G14 G15 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.intfin.2018.04.001

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