Do Islamic and socially responsible stocks act as a safe refuge for the US stock market?

Yosra Ridha Ben Said and Asma Khabou

Journal of Chinese Economic and Business Studies, 2025, vol. 23, issue 3, 431-456

Abstract: Our work aims to compare and specify the role that Islamic and socially responsible stocks can play in times of stock market crises. For crises, we extend our study to the four crises that have occurred since 2008: the global financial crisis, the European Sovereign crisis, the COVID-19 crisis, and the Ukrainian-Russian conflict. In this paper, we study the dynamics of the correlation between Islamic stock returns, socially responsible stocks, and US stock returns for the period 2008–2022. We adopt the DCC-GARCH model to determine the best strategy to hedge a portfolio against the risk of adverse price movements in the US stock market. Our main results demonstrate the important diversifying role of Islamic and socially responsible indices for conventional US stocks and reject the role of safe haven and hedge, respectively, in times of crisis and stability.

Date: 2025
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DOI: 10.1080/14765284.2025.2472505

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