Asymmetric and dynamic links in GCC Sukuk-stocks: Implications for portfolio management before and during the COVID-19 pandemic

Arfaoui Mongi (), Walid Chkili and Aymen Ben Rejeb

The Journal of Economic Asymmetries, 2022, vol. 25, issue C

Abstract: This paper investigates the asymmetric and dynamic links between Sukuk and Islamic-conventional stocks for the GCC countries. It uses the VARMA-AGARCH modelling approach of McAleer, Hoti, and Chan (2009), on daily return indices for the period spanning from August 13, 2013 to December 31, 2020. Empirical results reveal the existence of interdependence both in return dynamics and shock effects as well as in volatility spillovers and cross-markets asymmetric shock spillovers. The results point out also significant dynamic interplays between Islamic and conventional equity indices. The estimated hedging effectiveness suggests that incorporating stocks in a full sukuk portfolio does not affect the variance but slightly reduce the risk-adjusted return except for DJIM GCC equity index in the full sample period. Alternatively, incorporating sukuk in a full stocks unhedged portfolio significantly reduce its variance and raise the risk-adjusted return except for the DJIM GCC equity index. We also note that sukuk is overweighted for both portfolio design and hedging strategies and provide the best profit-making portfolio. The findings continued for the COVID-19 period.

Keywords: Sukuk; Islamic stocks; Spillovers; Asymmetry; Portfolio diversification; VARMA-BEKK-AGARCH (search for similar items in EconPapers)
JEL-codes: C58 F30 G11 G15 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:25:y:2022:i:c:s1703494922000056

DOI: 10.1016/j.jeca.2022.e00244

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