The spillover of media sentiment on the sukuk bonds during COVID-19 pandemic

Abstract

ABSTRACT This study focuses on the examination of the spillover impact of media sentiments (media coverage index, MCI), on the returns and volatility of the different investment graded sukuk bonds during the COVID-19 pandemic using the Time-varying Parameter Vector Autoregressive (TVP-VAR) model. We find that media sentiments have a stronger spillover impact on the bonds’ returns than their volatilities. The impacts are also found to be higher around the first few months of 2020 and 2021. The lower investment grade sukuk bonds are net transmitters of spillovers to their higher investment grade sukuk bonds counterparts. Sukuk bond BBB becomes a net recipient of spillovers and its net directional spillover relationship with sukuk bond AAA becomes zero. The spillover relationship is generally time-varying, with exceptional spillovers occurring during the early periods of the outbreak of the pandemic and the rise of its second wave.