ABSTRACT
Purpose: This conceptual paper aims to explore portfolio replication to resolve post-COVID pandemic private and public debt. This paper stresses the need to be less dependent on a debt-based system and the emergence Islamic equity market. Design/methodology/approach: This study analyses different types of risks involved in Islamic and conventional portfolios by using risk measures such as relative beta and comparatively examining the systematic and downside risk exposure of Islamic and conventional portfolios. Data was collected monthly from 2016 to 2022. Findings: The findings indicate that the replications of a conventional portfolio into an Islamic portfolio are compatible with the regulatory standard, sharia boundaries and professional practices developed from investment theory. The result shows that Islamic portfolios have lower risk exposure compared with their conventional counterparts in most of the sample years, therefore, become further attractive for debt–equity portfolio swaps and Sharia-compliant investors preferring low-risk preferences. The result confirmed that the Islamic portfolios have a higher return and less risk than conventional portfolios. Research limitations/implications: The implications of this research are to provide a road map to the regulators, policymakers, governments and the financial industry on how to rearrange some of the public and private debt. A likely remedy is incorporating Islamic financial instrument principles through the equitisation of public and private debt. Practical implications: This research contributes to investors (particularly those who want to avoid riba [usury] based investment) to make more diversified portfolios by considering Islamic portfolios to reduce risk exposure. Originality/value: To the best of the authors' knowledge, this is the first paper to create bivariate debt–equity portfolios swaps composed of Islamic and conventional assets. © 2020, Emerald Publishing Limited.
ABSTRACT
The COVID-19 pandemic has triggered a massive increase in global debt levels and exacerbated the trade-offs between the benefits and costs of accumulating government debt. This paper examines these trade-offs by putting the recent debt boom into a historical context. It reports three major findings. First, during the 2020 global recession, both global government and private debt levels rose to record highs, and at their fastest single-year pace, in five decades. Second, the debt-financed, massive fiscal support programs implemented during the pandemic supported activity and illustrated the benefits of accumulating debt. However, as the recovery gains traction, the balance of benefits and costs of debt accumulation could increasingly tilt toward costs. Third, more than two-thirds of emerging market and developing economies are currently in government debt booms. On average, the current booms have already lasted three years longer, and are accompanied by a considerably larger fiscal deterioration, than earlier booms. About half of the earlier debt booms were associated with financial crises in emerging market and developing economies. © 2022 Walter de Gruyter GmbH, Berlin/Boston 2022.
ABSTRACT
Purpose: This conceptual paper aims to explore portfolio replication to resolve post-COVID pandemic private and public debt. This paper stresses the need to be less dependent on a debt-based system and the emergence Islamic equity market. Design/methodology/approach: This study analyses different types of risks involved in Islamic and conventional portfolios by using risk measures such as relative beta and comparatively examining the systematic and downside risk exposure of Islamic and conventional portfolios. Data was collected monthly from 2016 to 2022. Findings: The findings indicate that the replications of a conventional portfolio into an Islamic portfolio are compatible with the regulatory standard, sharia boundaries and professional practices developed from investment theory. The result shows that Islamic portfolios have lower risk exposure compared with their conventional counterparts in most of the sample years, therefore, become further attractive for debt–equity portfolio swaps and Sharia-compliant investors preferring low-risk preferences. The result confirmed that the Islamic portfolios have a higher return and less risk than conventional portfolios. Research limitations/implications: The implications of this research are to provide a road map to the regulators, policymakers, governments and the financial industry on how to rearrange some of the public and private debt. A likely remedy is incorporating Islamic financial instrument principles through the equitisation of public and private debt. Practical implications: This research contributes to investors (particularly those who want to avoid riba [usury] based investment) to make more diversified portfolios by considering Islamic portfolios to reduce risk exposure. Originality/value: To the best of the authors’ knowledge, this is the first paper to create bivariate debt–equity portfolios swaps composed of Islamic and conventional assets. © 2020, Emerald Publishing Limited.