Volatility and correlation of Islamic and conventional indices during crises

We examine the correlation and volatility of Islamic indices and their conventional counterparts during the 2008–2009 Global Financial Crisis as well as the Covid-19 pandemic. We provide evidence that the volatility of Islamic indices is relatively lower than that of conventional peers during turmoil periods. Consistent with the decoupling hypothesis, our results indicate that the volatility of Islamic and the volatility of conventional indices tend to move in tandem in tranquil times but diverge in times of crises. Our results also indicate that the correlation between Islamic and conventional indices is a priced risk factor for Islamic index returns. © 2022 Elsevier Inc.

The COVID-19 Impact On Emerging Markets

The COVID-19 pandemic is affecting global markets through unprecedented circumstances. Fears surrounding such a novel virus have led to dramatic market turbulence and massive tumbles in stock prices. In this article, the authors explore the impact of COVID-19 on a comprehensive sample of 46 emerging countries and assess investors' perceptions toward credit risk. The authors also record the volume of new bond issues in conventional and Islamic bond markets and find that indeed COVID-19 has harshly struck the emerging countries, driving sharp declines in stock market indexes, causing an escalation in volatility levels, and widening the premiums on sovereign credit default swaps. Such upheavals, however, did not yet reach global financial crisis levels. The authors finally examine the reactions of the International Monetary Fund (IMF) local governments, and central banks in response to such a crisis.