Abstract
ABSTRACT This study examines the relationship between oil price shocks and Islamic bonds in 15 global markets. We focus on how they are connected in terms of time and frequency, specifically in quantiles. Through a quantile coherency approach, we discover that oil price shocks affect sukuk indices differently depending on the type of shock. When we increase the frequency of analysis from once a year to once a month, we observe a significant increase in coherence values of oil risk shocks across the majority of sukuk indices of oil exporting nations in both the lower and middle quantiles. Furthermore, based on quantile cross-spectral coherence analysis, we notice that the extreme quantile dependence between oil price shocks and the majority of the oil exporting nations’ sukuk indices remains stable over a short-time horizon. Our research indicates that demand shocks have a significant impact on the correlation between sukuk markets during uncertain periods, such as COVID-19 and the Russian-Ukraine war. Our findings provide a credible understanding of the behaviour of sukuk indices in response to fluctuations in oil prices, which is important for investment portfolio managers and policy decision-makers.
Published Version
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