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Crossroads of volatility spillover: Interactions between Islamic and conventional financial systems

Author

Listed:
  • Abdelhamid Addi

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Matteo Foglia

    (UNIBA - Università degli studi di Bari Aldo Moro = University of Bari Aldo Moro)

  • Gang-Jin Wang

    (HNU - Hunan University [Changsha])

  • Federica Miglietta

    (UNIBA - Università degli studi di Bari Aldo Moro = University of Bari Aldo Moro)

Abstract

This study investigates the volatility spillover in dual financial systems, namely Islamic financial systems (banking and insurance) and conventional financial systems (banking and insurance). Employing an information risk spillover network, we are able to explore information flow between conventional and Islamic banking and insurance systems. We analyze their role in transmitting spillover risk, showing that capturing spillovers of both sectors provides a more comprehensive perspective on financial risk contagion. Our results show that spillovers form as intersectoral clusters affected by their own volatility rather than by the volatility of another financial system. Moreover, we find an asymmetric spillover effect between the conventional and Islamic systems. The conventional sector tends to dominate spillover effects. Our results are important for regulators and investors, helping improve corporate and global risks assessment.

Suggested Citation

  • Abdelhamid Addi & Matteo Foglia & Gang-Jin Wang & Federica Miglietta, 2024. "Crossroads of volatility spillover: Interactions between Islamic and conventional financial systems," Post-Print hal-04891652, HAL.
    • Handle: RePEc:hal:journl:hal-04891652
    DOI: 10.1016/j.ribaf.2024.102700
    Note: View the original document on HAL open archive server: https://hal.science/hal-04891652v1
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    1. is not listed on IDEAS
    2. Hassan, M. Kabir & Kazak, Hasan & Öner, Muhammed Hadin & Akcan, Ahmet Tayfur & Tekdogan, Omer Faruk, 2026. "The impact of sukuk issuances on liquidity, profitability, and asset quality of Islamic banks," Research in International Business and Finance, Elsevier, vol. 81(C).
    3. Abeeb Olaniran & Elie Bouri & Rangan Gupta, 2025. "Multi-Moment and Multilayer Analysis of Connectedness among Clean, Brown, and Technology ETFs: The Role of Climate Risk," Working Papers 202519, University of Pretoria, Department of Economics.

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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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