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Do Islamic Bond (Sukuk) Prices Reflect Financial and Policy Uncertainty? A Quantile Regression Approach

Juan Reboredo () and Nader Naifar

Emerging Markets Finance and Trade, 2017, vol. 53, issue 7, 1535-1546

Abstract: We studied the relationship between Islamic bond (sukuk) prices and financial and policy uncertainty conditions using a quantile regression approach. Our empirical results for the period 2010–2014 show that US bond prices had a negative impact and causality effects on sukuk prices, whereas European Monetary Union bond prices only co-moved with sukuk prices. We also show that financial uncertainty had a negative effect that was limited to intermediate sukuk quantiles; moreover, sukuk prices were not affected by economic policy uncertainty or stock market returns. Therefore, although Islamic bonds are distinctive assets, their price dynamics are dependent on other bond-related asset prices and so incorporate financial market uncertainty.

Date: 2017
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Handle: RePEc:mes:emfitr:v:53:y:2017:i:7:p:1535-1546