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Religion vs ethics: hedge and safe haven properties of Sukuk and green bonds for stock markets pre- and during COVID-19

Muhammad Abubakr Naeem (Smurfit Graduate School of Business, University College Dublin, Dublin, Ireland)
Mustafa Raza Rabbani (Department of Economics and Finance, College of Business Administration, University of Bahrain, Sakhir, Kingdom of Bahrain)
Sitara Karim (Department of Business Administration, Faculty of Management Sciences, ILMA University, Karachi, Pakistan)
Syed Mabruk Billah (International Institute for Halal Research and Training, International Islamic University Malaysia, Selangor, Malaysia)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 15 December 2021

Issue publication date: 17 March 2023




This study aims to examine the hedge and safe-haven properties of the Sukuk and green bond for the stock markets pre- and during the COVID-19 pandemic period.


To test the hedge and safe-haven characteristics of Sukuk and green bonds for stock markets, the study first uses the methodology proposed by Ratner and Chiu (2013). Next, the authors estimate the hedge ratios and hedge effectiveness of using Sukuk and green bonds in a portfolio with stock markets.


Strong safe-haven features of ethical (green) bonds reveal that adding green bonds into the investment portfolios brings considerable diversification avenues for the investors who tend to take fewer risks in periods of economic stress and turbulence. The hedge ratio and hedge effectiveness estimates reveal that green bonds provide sufficient evidence of the hedge effectiveness for various international stocks.

Practical implications

The study has significant implications for faith-based investors, ethical investors, policymakers and regulatory bodies. Religious investors can invest in Sukuk to relish low-risk and interest-free investments, whereas green investors can satisfy their socially responsible motives by investing in these investment streams. Policymakers can direct the businesses to include these diversifiers for portfolio and risk management.


The study provides novel insights in the testing hedge and safe-haven attributes of green bonds and Sukuk while using unique methodologies to identify multiple low-risk investors for investors following the uncertain COVID-19 pandemic.



Muhammad Abubakr Naeem gratefully acknowledges the support of Science Foundation Ireland under grant number 16/SPP/3347.


Naeem, M.A., Raza Rabbani, M., Karim, S. and Billah, S.M. (2023), "Religion vs ethics: hedge and safe haven properties of Sukuk and green bonds for stock markets pre- and during COVID-19", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 16 No. 2, pp. 234-252.



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