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Do Islamic Cryptocurrencies Provide Diversification Opportunities To Indonesian Islamic Investors?

Author

Listed:
  • Syed Aun R. Rizvi

    (Lahore University of Management Sciences, Lahore, Pakistan)

  • Mohsin Ali

    (Taylor’s Business School, Taylor’s University, Malaysia)

Abstract

This study examines whether Islamic gold-backed cryptocurrencies (Onegram and X8X) provide any diversification benefits to the Islamic investors of Indonesia. We study the co-movements between return and volatility of cryptocurrencies and Indonesian Islamic equity indices during the pre-COVID-19 and COVID-19 periods. We employ Multivariate Generalized Autoregressive Conditional Heteroscedastic-Dynamic Conditional Correlation (M-GARCH-DCC) and Continuous Wavelet Transforms (CWT) for this study. We find that the COVID-19 crisis enhanced the spillover effect among the Islamic gold-backed cryptocurrencies and Islamic equities. We also provide evidence that Indonesian investors may invest in cryptocurrencies to minimize the equity sector risks during the pandemic. Our results bear significant implications for portfolio diversification strategies for Indonesian investors.

Suggested Citation

  • Syed Aun R. Rizvi & Mohsin Ali, 2022. "Do Islamic Cryptocurrencies Provide Diversification Opportunities To Indonesian Islamic Investors?," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 8(3), pages 441-454, August.
    • Handle: RePEc:idn:jimfjn:v:8:y:2022:i:3e:p:441-454
    DOI: https://doi.org/10.21098/jimf.v8i3.1563
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    More about this item

    Keywords

    COVID-19; Islamic gold-backed cryptocurrencies; Indonesian Islamic equity investors; Wavelet; MGARCH-DCC;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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