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Asymmetric spillover effects of Covid-19 on the performance of the Islamic finance industry: A wave analysis and forecasting

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  • Ghouse, Ghulam
  • Bhatti, Muhammad Ishaq
  • Aslam, Aribah
  • Ahmad, Nawaz

Abstract

This paper investigates the spillover effects of the waves of Covid-19 that affected the performance of the Islamic financial sector index (KMI 30) concerning Pakistan's stock exchange. The daily data is used on confirmed registered cases of Covid-19 and the KMI 30 stock prices from February 2020 to June 2022. The data is distributed into five segments on the basis of Covid-19 waves. The asymmetric GJR-GARCH is used to capture the effect of Covid-19 during each wave and E-GARCH is used to see the positive and negative impacts of Covid-19 on KMI through spillover effects. The E-GARCH model also serves to forecast the conditional variance. The Chow structural break point and Bai and Perron tests identify the structural breaks in each wave. Results of structural break testing confirm the presence breaks in each wave. Meanwhile volatility modeling results indicate there is an asymmetric effect in the return series. The E-GARCH model results reveal that there is return and volatility spillover effect from Covid-19 to KMI 30 in each wave. In future the conditional volatility remains less than the expected volatility as predicted by the forecasting statistics. We respond to policy calls by sharing our novel research in not only combating, but also assisting the required urgency of planning for future of Covid-19 outbreaks.

Suggested Citation

  • Ghouse, Ghulam & Bhatti, Muhammad Ishaq & Aslam, Aribah & Ahmad, Nawaz, 2023. "Asymmetric spillover effects of Covid-19 on the performance of the Islamic finance industry: A wave analysis and forecasting," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    • Handle: RePEc:eee:joecas:v:27:y:2023:i:c:s1703494922000408
    DOI: 10.1016/j.jeca.2022.e00280
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    3. Khaliq Ul Rehman & Ghulam Ghouse, 2024. "Examining Inflation Expectations within Asian Economies: Application of Wavelet Quantile Analysis towards Assessing Monetary Policy Credibility," Journal of Economic Impact, Science Impact Publishers, vol. 6(1), pages 70-80.
    4. Awad Asiri & Mohammed Alnemer & M. Ishaq Bhatti, 2023. "Interconnectedness of Cryptocurrency Uncertainty Indices with Returns and Volatility in Financial Assets during COVID-19," JRFM, MDPI, vol. 16(10), pages 1-18, September.
    5. hafeez, neelam & naseem naik, sadia, 2023. "Economic Consequences of the COVID-19 Eruption: A Study of Selected South Asian Countries," MPRA Paper 117319, University Library of Munich, Germany.
    6. Hasan, Md. Bokhtiar & Hassan, M. Kabir & Alhomaidi, Asem, 2023. "How do sectoral Islamic equity markets react to geopolitical risk, economic policy uncertainty, and oil price shocks?," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    7. Pandey, Dharen Kumar & Assaf, Rima & Rai, Varun Kumar, 2023. "Did the Indian stock market sail the Russia-Ukraine storm safely?," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    8. Ahmad Yousaf & Ufaq Adeel & Muhammad Hanan Arshad, 2023. "The Spill-over Effects between Oil and Gas Marketing and Exploration Firms of Pakistan Stock Exchange (PSX) KSE-100 index: During the Times of COVID-19 and Russian-Ukraine War," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(4), pages 65-78.

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