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Pandemic crisis versus global financial crisis: Are Islamic stocks a safe-haven for G7 markets?

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  • Muhammad Arif
  • Muhammad Abubakr Naeem
  • Mudassar Hasan
  • Suha M Alawi
  • Farhad Taghizadeh-Hesary

Abstract

This study draws a comparison between the Global Financial Crisis (GFC) and the COVID-19 pandemic crisis to assess the safe-haven potential of Islamic stocks for G7 stock markets. We employ the cross-quantilogram framework of Han et al., which considers the non-linearity in the relationship, and thus captures the correlation between the Islamic and G7 stock markets across various quantiles reflecting different market conditions. The analysis also includes the time-varying cross-quantile correlation to observe the evolution of Islamic stocks' safe-haven potential. Our full sample analysis shows that Islamic stocks do not exhibit safe-haven properties for G7 stock markets. During the GFC period, Islamic stocks show some diversification benefits for the G7 stock markets. Notably, Islamic stocks emerged as a robust safe-haven asset for the G7 stock markets during the pandemic crisis. The study carries essential insights for equity investors and regulators of G7 and other countries to implement diversification/hedging strategies that would involve Islamic stocks to protect equity investments and the overall financial system amid the financial downturns.

Suggested Citation

  • Muhammad Arif & Muhammad Abubakr Naeem & Mudassar Hasan & Suha M Alawi & Farhad Taghizadeh-Hesary, 2022. "Pandemic crisis versus global financial crisis: Are Islamic stocks a safe-haven for G7 markets?," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 35(1), pages 1707-1733, December.
    • Handle: RePEc:taf:reroxx:v:35:y:2022:i:1:p:1707-1733
    DOI: 10.1080/1331677X.2021.1910532
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    Citations

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    Cited by:

    1. Chang, Hao-Wen & Chang, Tsangyao & Wang, Mei-Chih, 2024. "Revisit the impact of exchange rate on stock market returns during the pandemic period," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    2. Mensi, Walid & Rehman, Mobeen Ur & Maitra, Debasish & Al-Yahyaee, Khamis Hamed & Vo, Xuan Vinh, 2023. "Frequency spillovers and portfolio risk implications between Sukuk, Islamic stock and emerging stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 139-157.
    3. Belanes, Amel & Saâdaoui, Foued & Abedin, Mohammad Zoynul, 2024. "Potential diversification benefits: A comparative study of Islamic and conventional stock market indexes," Research in International Business and Finance, Elsevier, vol. 67(PA).
    4. Shahzad, Umer & Ghaemi Asl, Mahdi & Khalfaoui, Rabeh & Tedeschi, Marco, 2024. "Extreme contributions of conventional investments vis-à-vis Islamic ones to renewables," Renewable and Sustainable Energy Reviews, Elsevier, vol. 189(PB).
    5. Abdullah, Mohammad & Chowdhury, Mohammad Ashraful Ferdous & Sulong, Zunaidah, 2023. "Asymmetric efficiency and connectedness among green stocks, halal tourism stocks, cryptocurrencies, and commodities: Portfolio hedging implications," Resources Policy, Elsevier, vol. 81(C).

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