Regime specific spillover between Dow Jones Islamic Market World Index, Islamic gold-backed crypto currencies and the blockchain halal index

Yousra Trichilli and Mouna Boujelbéne

International Journal of Islamic and Middle Eastern Finance and Management, 2022, vol. 16, issue 3, 464-481

Abstract: Purpose - The purpose of this paper is to explore the relationship between Dow Jones Islamic Market World Index, Islamic gold-backed cryptocurrencies and halal chain in the presence of state (regime) dynamics. Design/methodology/approach - The authors have used the Markov-switching model to identify bull and bear market regimes. Moreover, the dynamic conditional correlation, the Baba, Engle, Kraft and Kroner- generalized autoregressive conditional heteroskedasticity and the wavelet coherence models are applied to detect the presence of spillover and contagion effects. Findings - The findings indicate various patterns of spillover between halal chain, Dow Jones Islamic Market World Index and Islamic gold-backed cryptocurrencies in high and low volatility regimes, especially during the COVID-19 pandemic. Indeed, the contagion dynamics depend on the bull or bear periods of markets. Practical implications - These present empirical findings are important for current and potential traders in gold-backed cryptocurrencies in that they facilitate a better understanding of this new type of assets. Indeed, halal chain is a safe haven asset that should be combined with Islamic gold-backed cryptocurrencies for better performance in portfolio optimization and hedging, mainly during the COVID-19 period. Originality/value - To the best of the authors’ knowledge, this paper is the first research on the impact of the halal chain on the Dow Jones Islamic Market World Index return, Islamic gold-backed cryptocurrencies returns in the bear and bull markets around the global crisis caused by the COVID-19 pandemic.

Keywords: Islamic gold-backed cryptocurrencies; Contagion; Halal chain; Regime switching; Dow Jones Islamic Market World Index (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:imefmp:imefm-09-2021-0395

DOI: 10.1108/IMEFM-09-2021-0395

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