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Are Islamic stocks immune from financial crises? Evidence from contagion tests

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  • Hassan, Kamrul
  • Hoque, Ariful
  • Gasbarro, Dominic
  • Wong, Wing-Keung

Abstract

Given the alleged uniqueness of Islamic stocks, it is expected that they should provide insurance when faced with adverse market conditions. This expectation is tested by assessing contagion, using 25 Islamic indexes during the period 2007–2017, by employing contemporary econometric techniques. The results reveal robust contagion effects of the financial crisis on Islamic stock indexes. Furthermore, we find Baker and Wurgler’s investor sentiment can predict Islamic stock returns during the crisis period. Our findings indicate that Islamic stocks cannot be used as a haven asset during financial turmoil.

Suggested Citation

  • Hassan, Kamrul & Hoque, Ariful & Gasbarro, Dominic & Wong, Wing-Keung, 2023. "Are Islamic stocks immune from financial crises? Evidence from contagion tests," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 919-948.
    • Handle: RePEc:eee:reveco:v:86:y:2023:i:c:p:919-948
    DOI: 10.1016/j.iref.2020.08.004
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    More about this item

    Keywords

    Islamic indexes; Global financial crisis; Contagion; Higher-order moments;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G1 - Financial Economics - - General Financial Markets

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