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Volatility and correlation of Islamic and conventional indices during crises

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  • Chazi, Abdelaziz
  • Samet, Anis
  • Azad, A.S.M. Sohel

Abstract

We examine the correlation and volatility of Islamic indices and their conventional counterparts during the 2008–2009 Global Financial Crisis as well as the Covid-19 pandemic. We provide evidence that the volatility of Islamic indices is relatively lower than that of conventional peers during turmoil periods. Consistent with the decoupling hypothesis, our results indicate that the volatility of Islamic and the volatility of conventional indices tend to move in tandem in tranquil times but diverge in times of crises. Our results also indicate that the correlation between Islamic and conventional indices is a priced risk factor for Islamic index returns.

Suggested Citation

  • Chazi, Abdelaziz & Samet, Anis & Azad, A.S.M. Sohel, 2023. "Volatility and correlation of Islamic and conventional indices during crises," Global Finance Journal, Elsevier, vol. 55(C).
    • Handle: RePEc:eee:glofin:v:55:y:2023:i:c:s1044028322001028
    DOI: 10.1016/j.gfj.2022.100800
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    More about this item

    Keywords

    Volatility; Islamic stock index; Ethical investing; Crises; Covid-19;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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