IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v17y2024i7p305-d1437133.html
   My bibliography  Save this article

The Impact of the Cryptocurrency Market on Islamic vs. Conventional Stock Returns: Evidence from Gulf Cooperation Council Countries

Author

Listed:
  • Naji Mansour Nomran

    (Department of Finance and Accounting, College of Business Administration, Kingdom University, Riffa 40434, Bahrain)

  • Abdelkader Laallam

    (Department of Finance, School of Business, King Faisal University, Al-Hasa 31982, Saudi Arabia)

  • Razali Haron

    (Institute of Islamic Banking and Finance, International Islamic University Malaysia, Kuala Lumpur 53100, Malaysia)

  • Aghilasse Kashi

    (Department of Islamic Finance, College of Islamic Studies, Hamad Bin Khalifa University, Doha P.O. Box 34110, Qatar)

  • Zakir Hossen Shaikh

    (Department of Finance and Accounting, College of Business Administration, Kingdom University, Riffa 40434, Bahrain)

  • Joji Abey

    (Department of Finance and Accounting, College of Business Administration, Kingdom University, Riffa 40434, Bahrain)

Abstract

The rapid rise and widespread global adoption of cryptocurrencies in recent years has fundamentally transformed the international financial landscape, with digital assets increasingly being recognized for their potential to influence the stability and performance of traditional capital markets. Against this backdrop, this study aims to empirically investigate the impact of cryptocurrency returns on Islamic vs. conventional stock returns in Gulf Cooperation Council (GCC) countries. The salient distinctions between Islamic and conventional stock markets include fundamental differences in principles, investment allocations, and risk profiles, underscoring the importance of examining the impact of cryptocurrency returns on these distinct equity segments. Daily data were collected from stock indices in five GCC countries over the period 2016–2019, including two sub-periods: before and after the 2017 crypto crash. Pooled OLS, fixed effects, random effects, and generalized linear models (GLMs) were used to analyze the data collected during the study. With the GCC increasingly focusing on cryptocurrency markets, there is growing concern about these markets’ potential impact on regional stocks. This study addresses the important questions of whether the impacts of the cryptocurrency market on Islamic vs. conventional stock markets differ throughout the GCC region and how these impacts have evolved since the crypto crash period. The findings reveal that cryptocurrency returns had a negative impact on both GCC Islamic and conventional stock market returns for the full sample period (2016–2019), and the negative effect was far more pronounced for conventional stocks. For the two sub-periods before and after the crash, only the cryptocurrency market and conventional GCC stocks remained negatively correlated, while the cryptocurrency market and the GCC Islamic stock markets became uncorrelated. Thus, for the calmer sub-periods before and after the crypto crash, the rise in cryptocurrency returns may have enticed GCC investors away from conventional stocks, perhaps resulting in a decline in their investment in these stocks. Meanwhile, those who invest in Islamic stocks may not be exposed to this temptation.

Suggested Citation

  • Naji Mansour Nomran & Abdelkader Laallam & Razali Haron & Aghilasse Kashi & Zakir Hossen Shaikh & Joji Abey, 2024. "The Impact of the Cryptocurrency Market on Islamic vs. Conventional Stock Returns: Evidence from Gulf Cooperation Council Countries," JRFM, MDPI, vol. 17(7), pages 1-21, July.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:7:p:305-:d:1437133
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/17/7/305/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/17/7/305/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nafis Alam & Lokesh Gupta & Abdolhossein Zameni, 2019. "Fintech and Islamic Finance," Springer Books, Springer, number 978-3-030-24666-2, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mustafa Raza Rabbani & Shahnawaz Khan & Eleftherios I. Thalassinos, 2020. "FinTech, Blockchain and Islamic Finance: An Extensive Literature Review," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 65-86.
    2. Nikita Moiseev & Alexey Mikhaylov & Hasan Dinçer & Serhat Yüksel, 2023. "Market capitalization shock effects on open innovation models in e-commerce: golden cut q-rung orthopair fuzzy multicriteria decision-making analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-25, December.
    3. Mustafa Raza Rabbani & Abu Bashar & Nishad Nawaz & Sitara Karim & Mahmood Asad Mohd. Ali & Habeeb Ur Rahiman & Md. Shabbir Alam, 2021. "Exploring the Role of Islamic Fintech in Combating the Aftershocks of COVID-19: The Open Social Innovation of the Islamic Financial System," JOItmC, MDPI, vol. 7(2), pages 1-19, May.
    4. Kok, Seng Kiong & Akwei, Cynthia & Giorgioni, Gianluigi & Farquhar, Stuart, 2022. "On the regulation of the intersection between religion and the provision of financial services: Conversations with market actors within the global Islamic financial services sector," Research in International Business and Finance, Elsevier, vol. 59(C).
    5. Sharina Tajul Urus & Intan Salwani Mohamed, 2021. "A Flourishing Fintech Ecosystem: Conceptualization and Governing Issues in Malaysia," Business and Economic Research, Macrothink Institute, vol. 11(3), pages 106-131, December.
    6. Yousaf, Imran & Yarovaya, Larisa, 2022. "Spillovers between the Islamic gold-backed cryptocurrencies and equity markets during the COVID-19: A sectorial analysis," Pacific-Basin Finance Journal, Elsevier, vol. 71(C).
    7. Al-Ansari, Khalid Ahmed & Aysan, Ahmet Faruk, 2022. "Central Bank Digital Currencies, Internet of Things, and Islamic Finance: Blockchain Prospects and Challenges," MPRA Paper 113287, University Library of Munich, Germany, revised 30 May 2022.
    8. Ahmed, Walid M.A., 2021. "How do Islamic equity markets respond to good and bad volatility of cryptocurrencies? The case of Bitcoin," Pacific-Basin Finance Journal, Elsevier, vol. 70(C).
    9. Peter Wanke & M. Kabir Hassan & Md. Abul Kalam Azad & Md. Azizur Rahman & Naznin Akther, 2022. "Application of a distributed verification in Islamic microfinance institutions: a sustainable model," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-12, December.
    10. Yongjie Zhu & Shanyue Jin, 2023. "COVID-19, Digital Transformation of Banks, and Operational Capabilities of Commercial Banks," Sustainability, MDPI, vol. 15(11), pages 1-17, May.
    11. Marwan Mohamed Abdeldayem & Saeed Hameed Al Dulaimi, 2021. "A qualitative approach to evaluate the reconciliation of GOLDX and OneGram in Islamic Finance," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 39(1), pages 113-134.
    12. Ozili, Peterson K., 2023. "Digital finance research and developments around the World: a literature review," MPRA Paper 115780, University Library of Munich, Germany.
    13. Imad Antoine Ibrahim & Jon Truby, 2022. "Governance in the era of Blockchain technology in Qatar: a roadmap and a manual for Trade Finance," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(4), pages 419-438, December.
    14. Pavel Baboshkin & Alexey Mikhaylov & Zaffar Ahmed Shaikh, 2022. "Sustainable Cryptocurrency Growth Impossible? Impact of Network Power Demand on Bitcoin Price," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 116-130, June.
    15. Suria Abu Basar & Noor Ayuernie Ibrahim & Fazilah Tamsir & Asma Rina Abdul Rahman & Noor Nasyikin Mohd Zain & Halimi Poniran & Rina Fadhilah Ismail, 2024. "I-FinTech Adoption Mediation on the Financial Literacy Elements and Sustainable Entrepreneurship among Bumiputera MSMEs in Malaysia," International Journal of Economics and Financial Issues, Econjournals, vol. 14(4), pages 138-147, July.
    16. Lee, Kangsan & Jeong, Daeyoung, 2023. "Too much is too bad: The effect of media coverage on the price volatility of cryptocurrencies," Journal of International Money and Finance, Elsevier, vol. 133(C).
    17. Raazia Gul & Mamdouh Abdulaziz Saleh Al-Faryan, 2023. "From insights to impact: leveraging data analytics for data-driven decision-making and productivity in banking sector," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-8, December.
    18. Rama, Ali & Jiang, Chunxia & Johan, Sofia & Liu, Hong & Mai, Yong, 2022. "Religious and social narratives and crowdfunding success," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:17:y:2024:i:7:p:305-:d:1437133. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.