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Exploring the Dynamic Links between GCC Sukuk and Commodity Market Volatility

Nader Naifar

International Journal of Financial Studies, 2018, vol. 6, issue 3, 1-18

Abstract: This study investigates the impact of commodity price volatility (including soft commodities, precious metals, industrial metals, and energy) on the dynamics of corporate sukuk returns. Using a sample of sukuk indices from Gulf Cooperation Council (GCC) countries, we study the dynamic conditional correlation using a multivariate generalized autoregressive conditional heteroskedasticity dynamic conditional correlation (GARCH-DCC) process. Empirical results show a time-varying negative correlation between GCC sukuk returns and commodity prices. In fact, a negative conditional correlation among assets of a given portfolio implies higher gain-to-risk ratios. An understanding of volatility and dynamic co-movements in financial and commodity markets is important for portfolio allocation and risk management practices.

Keywords: sukuk; commodity prices; dynamic conditional correlation; Islamic finance (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 F2 F3 F41 F42 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:gam:jijfss:v:6:y:2018:i:3:p:72-:d:163414