Islamic bonds (sukuk) a safe haven for investors? Truth or myth?

Abstract

Purpose

This study aims to find whether sukuk (Islamic bonds) possess a safe haven property for investors or not.

Design/methodology/approach

To analyze this statement, the study used data from MSCI World conventional and MSCI World Islamic indices from August 17, 2012 to June 8, 2022. The study used the generalized autoregressive conditional heteroskedasticity (GARCH) variance technique, the most common technique used in stock data analysis.

Findings

The results dictate the absence of sukuk as a safe haven for investors as both the conventional and Islamic markets show decoupling behavior. The study finds concrete evidence of a strong association between the debt-based bond market and the Islamic sukuk market. As these markets mostly like to move in a parallel direction, a recession in a conventional bond market likely means a recession in the Islamic sukuk market.

Originality/value

This study is unique in incorporating the MSCI World Islamic Index and other Islamic indices of several Muslim countries, which was absent in previous research. Second, this study is unique because it adds a separate regression for the COVID era to show whether the movement of indices changed during regression.

Citation

Qadri, H.M.-U., Mustafa, A.U., Ali, H. and Tahir, A.U.M. (2024), "Islamic bonds (sukuk) a safe haven for investors? Truth or myth?", Journal of Islamic Accounting and Business Research, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JIABR-11-2022-0299