Co-integration of Sukuk and Bond Yields - Evidence from Globally Placed Sukuk

Jamshed Uppal

Journal of Management Sciences, 2017, vol. 4, issue 1, 106-115

Abstract: The study addresses the question ``How do the financial markets perceive and price internationally issued Islamic bonds?'' It is examined by empirically testing for the evidence of co-integration of sukuk yields with the US Treasury yields using Vector Error Correction (VEC) models. Our results indicate that the sukuk yields are highly co-integrated with the US Treasury yields in long-term relationships. The short-term dynamics of the sukuk yields with the interest rate series is, however, complex showing bi-directional influences. We infer that the international financial markets are viewing and pricing sukuk in a manner similar to that for the conventional bonds.

Keywords: Islamic finance; sukuk; Islamic bonds. (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:gei:journl:v:4:y:2017:i:1:p:106-115

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