The Financial Volatility of Islamic Banks during the Subprime Crisis

Aniss Boumediene and Jérôme Caby ()
Additional contact information
Aniss Boumediene: GREGOR - Groupe de Recherche en Gestion des Organisations - UP1 - Université Paris 1 Panthéon-Sorbonne - IAE Paris - Sorbonne Business School
Jérôme Caby: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

Post-Print from HAL

Abstract: This empirical study examines the financial stability of Islamic banks during the subprime crisis. It covers a sample of fourteen Islamic banks and fourteen conventional banks. The conditional variance (volatility) of returns was used to measure financial stability. The E-GARCH and GJR-GARCH asymmetric models were used to estimate volatility due to their ability to take into account the leverage effect. The results of this study show that conventional bank returns were highly volatile during the crisis period, while Islamic banks saw their volatility - initially low - increase during the crisis, though to a much more moderate extent. These results corroborate both the hypothesis that Islamic banks were at least partially immune to the subprime crisis and the underlying hypothesis that Islamic banks are not subject to the same risks as conventional banks - although, due to their links with the real economy, they do eventually suffer the consequences of the subprime crisis.

Keywords: Islamic banks; Leverage effect; Financial leverage; Islamic countries; Economic stabilization; Financial stability; Banking industry; Financial crises; Volatility (Finance); Subprime crisis (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Published in Bankers Markets & Investors : an academic & professional review, 2013, 126, pp.30 - 39

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01369253

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().