Abstract
Using the Baruník and Křehlík spillover index, the study examines the dynamic connectedness and spillovers between Islamic and conventional (G6) bond markets to reveal the time‐ and frequency‐domain dynamics of the two asset classes under different market conditions. From August 22, 2012, through September 17, 2021, the daily bond yield indices for Islamic and G6 markets were employed. The findings reveal that volatility spillovers between and within Islamic and/or G6 bond markets are time‐ and frequency‐dependent, although conventional bonds are more volatile than Islamic bonds during Black Swan periods. Across all time horizons, USA, UK, and Canada are the biggest producers of shocks to the Islamic and G6 markets, with Pakistan being the lowest shocks transmitter. During the European debt crisis, Brexit, and COVID‐19 periods, the results underscore delayed contagious spillovers emanating from USA, Canada, and UK. With both the Islamic and G6 bond markets, short‐term spillovers are more important than long‐term spillovers. Investors should use their understanding of market trends and volatility to hedge their holdings against poorer asset returns when volatility spillover is more severe during market turmoil. Spillovers should be closely monitored by policymakers, since they jeopardise cross‐market linkages.
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