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The power of diversification: Do African fixed-income investors have a chance in Malaysian Sukuk market?

Author

Listed:
  • Fatima Muhammad Abdulkarim
  • Mosab I. Tabash

Abstract

Purpose - This study investigates the presence of portfolio diversification benefits for South African, Nigerian, Ghanaian and Kenyan fixed-income investors diversifying bond portfolios in the Malaysian sovereign Sukuk market. Design/methodology/approach - The paper uses wavelet coherence and a multivariate generalized autoregressive conditional heteroscedastic (GARCH) model. The data cover the period from September 2013 to January 2019. Findings - The findings obtained from the wavelet coherence model reveal evidence of portfolio diversification opportunities for African fixed-income investors in the Malaysian sovereign Sukuk market. These opportunities are more significant in the short- and medium-term investment horizons than in the long-term. Also, the results of multivariate GARCH show that the Malaysian Sukuk market has a negative unconditional correlation with the South African bond market, signifying better diversification benefits for these investors. Practical implications - The findings have implications for both fund managers and investors intending to include Sukuk in a diversified portfolio to reduce their risks and maximize their return from bonds. Originality/value - To the best knowledge of the authors, this is the first study to examine the opportunities for African investors in the Malaysian Sukuk market.

Suggested Citation

  • Fatima Muhammad Abdulkarim & Mosab I. Tabash, 2020. "The power of diversification: Do African fixed-income investors have a chance in Malaysian Sukuk market?," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 12(1), pages 171-184, November.
    • Handle: RePEc:eme:ajemsp:ajems-07-2020-0338
    DOI: 10.1108/AJEMS-07-2020-0338
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    Cited by:

    1. Billah, Mabruk & Amar, Amine Ben & Balli, Faruk, 2023. "The extreme return connectedness between Sukuk and green bonds and their determinants and consequences for investors," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).

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