Conditional volatility and correlations between Sukuks, stocks, and gold in the GCC region

Walaa Hammad, Qaiser Munir, Tamara Teplova and Muhammad Abrar ul Haq

International Journal of Economics and Business Research, 2024, vol. 28, issue 3/4, 398-416

Abstract: Financial markets around the world have suffered significantly during the current COVID-19 pandemic. This study presents an important view of the predictive capacity of COVID-19 for the correlation between Islamic bonds, equity markets, and precious commodities in the GCC region. Specifically, this study investigates whether the volatility and co-movements behaviours between Sukuk, conventional stocks, Islamic stocks, and gold are correlated before and during the pandemic. Our analysis uses a dynamic conditional correlation (DCC) multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model from the period 30 August 2013 to 31 January 2022. Our results suggest that there is a strong correlation between Sukuks, conventional stocks, and Islamic stocks before and during the crisis. However, we have observed that the correlation decreases during the pandemic. With regards to correlation, Sukuk and conventional stocks along with Sukuk and Islamic stocks maintained a low correlation, while the conventional and Islamic stocks have a high correlation.

Keywords: Sukuk; stock markets; gold; dynamic correlations; conditional volatility; DCC-MGARCH. (search for similar items in EconPapers)
Date: 2024
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