Safe havens in Islamic financial markets: COVID-19 versus GFC

Using a bivariate dynamic conditional correlation (DCC) generalized autoregressive conditional heteroskedasticity (GARCH) model, this study compares the safe-haven properties of various assets against the major Gulf Cooperation Council (GCC) stock indexes during two periods of financial turmoil, the COVID-19 pandemic and the 2008 Global Financial Crisis (GFC). Sovereign bonds offered the highest hedging benefits under both crises. The traditional safe assets, gold and silver, which were reasonably productive under the GFC, have been less so during the pandemic. The Japanese yen emerged as a very safe choice for investors holding GCC stock indexes. Both sector indexes and stock indexes failed to safeguard investors most of the time during each crisis.

FAANG Stocks, Gold, and Islamic Equity: Implications for Portfolio Management during COVID-19

During the COVID-19 pandemic, technology stocks, such as FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google), attracted the attention of global investors due to the vast use of technology in daily business. However, technology stocks are generally considered risky stocks;hence, efficient risk management is required to construct an optimal portfolio. In this study, we investigate the volatility spillovers and dynamic conditional correlations among the daily returns of FAANG company stocks, gold, and sharia-compliant equity to construct the optimal portfolio weights and hedge ratios during the COVID-19 pandemic period by utilizing a multivariate GARCH framework. The dynamic conditional correlations reveal that both gold and sharia-compliant equities exhibit lower correlations with FAANG stocks during the COVID-19 pandemic, implying opportunities for portfolio diversification. The findings indicate that gold and shariah-compliant equity are good candidates to hedge FAANG stocks. These findings are highly relevant for international investors, asset managers, hedgers, and portfolio managers.

Sovereign bonds and flight to safety: Implications of the COVID-19 crisis for sovereign debt markets in the G-7 and E-7 economies

This study investigates the implications of the COVID-19 pandemic for sovereign debt in the G-7 and E-7 economies and explores the notion of sovereign bonds as a safe haven. Using a set of panel regression and dynamic connectedness TVP-VAR approaches, our results reveal that the impact of COVID-19 global case numbers on sovereign bonds has been contingent on the level of the country's financial and economic development. More precisely, our findings suggest that G-7 countries, where economic development is typically higher, have seen a negative effect of the COVID-19 pandemic on sovereign bond yield: sovereign 10-year bond yields declined as the number of COVID-19 global confirmed cases increased in G-7 countries. However, in E-7 countries, where economic growth and development are typically lower, sovereign bond yields responded positively to the initial increase in COVID-19 global confirmed case numbers, but this positive effect is not statistically significant. We also find that the G-7 and E-7 economies have a strong time-varying connectedness in relation to their bond markets and this effect is more pronounced in G-7 economies. Daily Infectious Disease Equity Market Volatility is likely to be the strongest predictor of total connectedness. Concomitantly, we shed new light on the predictive power of the number of COVID-19 confirmed cases and deaths, and the Daily Infectious Disease Equity Market Volatility Tracker on the interdependence of these sovereign bond markets. Overall, this paper highlights the heterogeneous effect of the COVID-19 pandemic on sovereign bond yields in G-7 and E-7 countries and the notion that the developed economies, with their developed sovereign bond markets, are still seen as a safe haven during times of crisis. © 2023 The Authors

Sovereign bonds and flight to safety: Implications of the COVID-19 crisis for sovereign debt markets in the G-7 and E-7 economies

This study investigates the implications of the COVID-19 pandemic for sovereign debt in the G-7 and E-7 economies and explores the notion of sovereign bonds as a safe haven. Using a set of panel regression and dynamic connectedness TVP-VAR approaches, our results reveal that the impact of COVID-19 global case numbers on sovereign bonds has been contingent on the level of the country's financial and economic development. More precisely, our findings suggest that G-7 countries, where economic development is typically higher, have seen a negative effect of the COVID-19 pandemic on sovereign bond yield: sovereign 10-year bond yields declined as the number of COVID-19 global confirmed cases increased in G-7 countries. However, in E-7 countries, where economic growth and development are typically lower, sovereign bond yields responded positively to the initial increase in COVID-19 global confirmed case numbers, but this positive effect is not statistically significant. We also find that the G-7 and E-7 economies have a strong time-varying connectedness in relation to their bond markets and this effect is more pronounced in G-7 economies. Daily Infectious Disease Equity Market Volatility is likely to be the strongest predictor of total connectedness. Concomitantly, we shed new light on the predictive power of the number of COVID-19 confirmed cases and deaths, and the Daily Infectious Disease Equity Market Volatility Tracker on the interdependence of these sovereign bond markets. Overall, this paper highlights the heterogeneous effect of the COVID-19 pandemic on sovereign bond yields in G-7 and E-7 countries and the notion that the developed economies, with their developed sovereign bond markets, are still seen as a safe haven during times of crisis.

Search for safe havens and resilience to global financial volatility: Response of GCC equity indexes to GFC and Covid-19

The bear Gulf Cooperation Council (GCC) sectoral equity markets in the midst of the COVID-19 pandemic presented us a test case to revisit the previously proclaimed refuge facets of gold and other precious commodities, as well as to find the resilience of these markets to global financial volatility. We further make a comparison of our findings with those obtained for the 2008 Global Financial Crisis (GFC) period. New evidence from our study based on bivariate Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity model confirms the potential of gold to serve as a weak safe haven amid both financial crises albeit with higher effectiveness during the early phase of the COVID-19 pandemic. As a whole, silver and crude oil couldn't offer sanctuary for GCC's sectoral equity markets. Further results show that unless hedged, returns of GCC equity markets are vulnerable to volatility and risk in the global financial markets.

Infectious disease (COVID-19)-related uncertainty and the safe-haven features of bonds markets

Purpose: This study aims to examine the hedge, diversifier and safe-haven properties of bonds against infectious disease-related equity market volatility (IDEMV), like COVID-19. Design/methodology/approach: The authors apply wavelet coherence methodology on the daily data of IDEMV and bond market (US, UK, Japan, Switzerland, Canada, Australia, Sweden, China and Europe) indices from 1 January 2000 to 14 February 2021. Findings: The results show no significant co-movement between these bond indices and IDEMV, thus confirming that they serve as a hedge against IDEMV. However, during the turbulent period like COVID-19, the authors find that the US, UK, Japan, Switzerland, Canada, Australia, Sweden, China and European bond markets act as safe-haven against IDEMV, whereas the UK, US, Japan and Canadian bond markets demonstrate an in-phase and positive co-movement with IDEMV during COVID-19, suggesting their role as a diversifier. Research limitations/implications: The study findings are important for investors and portfolio managers regarding risk management, portfolio diversification and investment strategies. Originality/value: The authors contribute to the fast growing body of work on the financial impacts of COVID-19 as well as to ongoing consideration of whether a bond is a safe-haven investment. © 2022, Emerald Publishing Limited.

Green investments: A luxury good or a financial necessity?

This study examines the diversification and hedging benefits of green investments for conventional stock portfolios in the context of the recent COVID-19 pandemic. While the findings confirm the status of gold as a strong hedge against stock market downturns, we find that clean energy investments, green bonds, in particular, have the potential to serve as a safe haven as well. In fact, compared to the other alternative and sustainable investments in our sample, green bonds are found to be the only asset that serves as a safe haven against large stock market fluctuations due to the COVID-19 pandemic. Portfolio analysis further shows that supplementing conventional stock portfolios with green bonds during the COVID-19 pandemic resulted in the highest risk-adjusted returns, compared to those supplemented with other alternative assets in the sample. Our findings support the emergence of green investments not as a luxury good, but a necessity for improved financial stability and performance, particularly during the turbulent market states driven by the recent pandemic. © 2021 Elsevier B.V.