Sailing with the Non-Conventional Stocks When There Is No Place to Hide

Are safe haven assets really safe during the 2008 global financial crisis and COVID-19 pandemic?

“…Their findings indicate that Islamic indices have both hedging and safe-haven properties. Azad et al (2018) obtain comparable results in the international market context. In contrast, Cevik and Bugan (2018) find no proof of safe-haven characteristics in Islamic financial markets.…”

“…Very few studies ( Ashraf, Rizwan, & Ahmad, 2020 ; Hasan, Mahi, Hassan, & Bhuiyan, 2021 ; Yarovaya, Elsayed, & Hammoudeh, 2021 ) have analyzed Islamic financial assets, such as Islamic stock indices and Sukuk (Islamic bonds), during COVID-19. The findings show that only Sukuk acts as a strong hedge against conventional bonds, though Islamic stock indices provide resilience against the 2008 GFC ( Azad, Azmat, Chazi, & Ahsan, 2018 ; Beck, Demirgüç-Kunt, & Merrouche, 2013 ; Farooq & Zaheer, 2015 ). Therefore, it appears that an asset's safe-haven role can alter from one crisis to another, increasing the need for regular assessment of the safe-haven role of different assets.…”

Time-Frequency Based Dynamics of Decoupling or Integration between Islamic and Conventional Equity Markets

“…Finally, for the majority made up of 33 out of 41 markets (developed and emerging), the results of this study indicated a contagion effect between their Islamic and conventional equity indices which mean that the majority of the developed and emerging markets' Islamic equity markets show indifferent behavior from their conventional counterparts, particularly during crisis periods. This evidence is supported by Azad et al (2018) who applied quantile regressions and did not find evidence of the safe-haven ability of developed (US, UK, Japan) and emerging (India along with other four countries except for China) countries' Islamic indices, nor any diversification benefits to investors during crisis periods. Therefore, the overall results of this study for region-wise developed and developing country pairs (except for Hong Kong, New Zealand, Ireland, Denmark, Argentina and Peru) are consistent with the argument built by Ajmi et al (2014) that Islamic equity markets cannot act to hedge against risky movements in conventional equity markets, particularly during periods of financial turmoil.…”

“…Similarly, for examining the contagion effect or the safe-haven ability of Islamic stocks, we limited the crisis period to one year such as the GFC period from July 2007 to June 2008 and the ESDC from 2011-2012, as suggested by Azad et al (2018). We observed that all of Asia Pacific's developed and emerging Islamic and conventional stock indices return depict an increase in correlations during these periods particularly at short-term horizons, which suggest that all Asia Pacific country's Islamic and conventional equity markets have suffered from pure contagion (high-coherency areas).…”

“…However, some of the recent studies such as Ho et al, Narayan and Bannigidadmath (Ho and M 2014;Narayan and Bannigidadmath 2017) argue that during the global financial crisis, the Islamic stocks were found to be more profitable than the conventional stocks. Thus, the Islamic stocks were found to be decoupled from their conventional counterparts due to their safe-haven/hedge ability (Mensi et al 2015;Hkiri et al 2017;Azad et al 2018). This suggests that investors could diversify their risks by investing in Islamic stocks, particularly during financial and economic downturns.…”