Are Islamic Equity Markets 'Safe Havens'? Exploring the Contagion Effects between Metal Future Markets and Malaysian Islamic Bonds Using DCC-FIGARCH During the Recent Global Financial Crisis of 2008
International Journal of Economics, Management and Accounting, 2021
30 Pages Posted: 2 Mar 2022
Date Written: December 28, 2021
Abstract
This paper examines the time-varying conditional correlations between seventeen metal future markets and Malaysian Islāmic bonds. We apply twelve six variate dynamic conditional correlation (DCC) FIGARCH models in order to capture potential contagion effects between the markets for the period 2007-2011. Empirical results reveal contagion during the under investigation period regarding the twelve six variate models, showing potential volatility transmission channels among the markets and implying that the sukūk bonds are not a safe haven during bearish times without portfolio diversification strategies. Findings have crucial implications for policymakers who provide regulations for the above derivative markets and for investors who invest long-term in Islāmic bonds.
Keywords: DCC-FIGARCH, Metal futures, Ṣukūk, Financial contagion,Islāmicfinance
JEL Classification: C58, C61, E44, G10, G20
Suggested Citation: Suggested Citation