Religion vs ethics: hedge and safe haven properties of Sukuk and green bonds for stock markets pre- and during COVID-19

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Abubakr Naeem ◽  
Mustafa Raza Rabbani ◽  
Sitara Karim ◽  
Syed Mabruk Billah
Keyword(s):  
Stock Markets ◽  
Economic Stress ◽  
Low Risk ◽  
Sufficient Evidence ◽  
Safe Haven ◽  
Socially Responsible ◽  
Content Type ◽  
Hedge Ratios ◽  
Regulatory Bodies ◽  
Investment Portfolios

Purpose This study aims to examine the hedge and safe-haven properties of the Sukuk and green bond for the stock markets pre- and during the COVID-19 pandemic period. Design/methodology/approach To test the hedge and safe-haven characteristics of Sukuk and green bonds for stock markets, the study first uses the methodology proposed by Ratner and Chiu (2013). Next, the authors estimate the hedge ratios and hedge effectiveness of using Sukuk and green bonds in a portfolio with stock markets. Findings Strong safe-haven features of ethical (green) bonds reveal that adding green bonds into the investment portfolios brings considerable diversification avenues for the investors who tend to take fewer risks in periods of economic stress and turbulence. The hedge ratio and hedge effectiveness estimates reveal that green bonds provide sufficient evidence of the hedge effectiveness for various international stocks. Practical implications The study has significant implications for faith-based investors, ethical investors, policymakers and regulatory bodies. Religious investors can invest in Sukuk to relish low-risk and interest-free investments, whereas green investors can satisfy their socially responsible motives by investing in these investment streams. Policymakers can direct the businesses to include these diversifiers for portfolio and risk management. Originality/value The study provides novel insights in the testing hedge and safe-haven attributes of green bonds and Sukuk while using unique methodologies to identify multiple low-risk investors for investors following the uncertain COVID-19 pandemic.

Are ESG stocks safe-haven during COVID-19?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ghulame Rubbaniy ◽  
Ali Awais Khalid ◽  
Muhammad Faisal Rizwan ◽  
Shoaib Ali
Keyword(s):  
Portfolio Choice ◽  
Stock Markets ◽  
Robustness Analysis ◽  
Wavelet Coherence ◽  
Safe Haven ◽  
Health Crisis ◽  
Content Type ◽  
Hedging Strategies ◽  
Stock Indices ◽  
Wavelet Coherency

Purpose The purpose of this study is to investigate safe-haven properties of environmental, social and governance (ESG) stocks in global and emerging ESG stock markets during the times of COVID-19 so that portfolio managers and equity market investors could decide to use ESG stocks in their portfolio hedging strategies during times of health and market crisis similar to COVID-19 pandemic. Design/methodology/approach The study uses a wavelet coherence framework on four major ESG stock indices from global and emerging stock markets, and two proxies of COVID-19 fear over the period from 5 February 2020 to 18 March 2021. Findings The results of the study show a positive co-movement of the global COVID-19 fear index (GFI) with ESG stock indices on the frequency band of 32 to 64 days, which confirms hedging and safe-haven properties of ESG stocks using the health fear proxy of COVID-19. However, the relationship between all indices and GFI is mixed and inconclusive on a frequency of 0–8 days. Further, the findings do not support the safe-haven characteristics of ESG indices using the market fear proxy (IDEMV index) of COVID-19. The robustness analysis using the CBOE VIX as a proxy of market fear supports that ESG indices do not possess safe-haven properties. The results of the study conclude that the safe-haven properties of ESG indices during the ongoing COVID-19 pandemic is contingent upon the proxy of COVID-19 fear. Practical implications The findings have important implications for the equity investors and assetty managers to improve their portfolio performance by including ESG stocks in their portfolio choice during the COVID-19 pandemic and similar health crisis. However, their investment decisions could be affected by the choice of COVID-19 proxy. Originality/value The authors believe in the originality of the paper due to following reasons. First, to the best of the knowledge, this is the first study investigating the safe-haven properties of ESG stocks. Second, the authors use both health fear (GFI) and market fear (IDEMV index) proxies of COVID-19 to compare whether safe-haven properties are characterized by health fear or market fear due to COVID-19. Finally, the authors use the wavelet coherency framework, which not only takes both time and frequency dimensions of the data into account but also remains unaffected by data stationarity and size issues.

Sustainable and socially responsible investing

Humanomics ◽  
2013 ◽  
Vol 29 (3) ◽  
pp. 164-186 ◽  
Author(s):  
Saeed BinMahfouz ◽  
M. Kabir Hassan
Keyword(s):  
Systematic Risk ◽  
Value Systems ◽  
Socially Responsible ◽  
Screening Process ◽  
Content Type ◽  
Responsible Investment ◽  
Sustainability Criteria ◽  
Fama And French ◽  
Investment Portfolios ◽  
The Impact

PurposeThere is a great deal of research that has been done to investigate the investment characteristics of conventional socially responsible investment portfolios compared to their broader conventional counterparts. However, the impact of incorporating sustainability criteria into the traditional Sharia screening process has not so far been investigated. Therefore, the study aims to give empirical evidence as to whether or not incorporating sustainability socially responsible criteria in the traditional Sharia screening process has a significant impact on the investment characteristics of the Islamic investment portfolio.Design/methodology/approachThe paper examines the investment characteristics of four groups of investment portfolios mainly, Dow Jones Global Index, Dow Jones Sustainability World Index, Dow Jones Islamic Market World Index and Dow Jones Islamic Market Sustainability Index. To improve the robustness of the study, the analysis was carried out at different levels. First, absolute mean return and t‐test were used to examine whether the difference between the different groups of investments is statistically significant or not. Second, risk adjusted equilibrium models, both single‐index and Fama and French multi‐index, were employed. This is to control for different risk exposure and investment style bias associated with different investment portfolios examined.FindingsThe paper finds that neither the Sharia nor the sustainability screening process seems to have an adverse impact on the performance and systematic risk of the investment portfolios compared to their unrestricted conventional counterparts. Therefore, Muslim as well as socially responsible investors can choose investments that are consistent with their value systems and beliefs without being forced to sacrifice performance or expose to higher systematic risk.Originality/valueThe study contributes to the existing literature by giving new evidence on the impact of incorporating sustainability criteria into the traditional Sharia screening process that has not so far been investigated.

Conditional dependence structure between oil prices and international stock markets

2019 ◽  
Vol 14 (2) ◽  
pp. 439-467 ◽  
Author(s):  
Wajdi Hamma ◽  
Bassem Salhi ◽  
Ahmed Ghorbel ◽  
Anis Jarboui
Keyword(s):  
Stock Markets ◽  
Oil Prices ◽  
Conditional Variance ◽  
Optimal Portfolio ◽  
Dependence Structure ◽  
Hedging Strategy ◽  
Content Type ◽  
Conditional Dependence ◽  
Hedge Ratios ◽  
Stock Portfolio

Purpose The purpose of this paper is to analyze the optimal hedging strategy of the oil-stock dependence structure. Design/methodology/approach The methodology consists to model the data over the daily period spanning from January 02, 2002 to May 19, 2016 by a various copula functions to better modeling the dependence between crude oil market and stock markets, and to use dependence coefficients and conditional variance to calculate optimal portfolio weights and optimal hedge ratios, and to suggest the best hedging strategy for oil-stock portfolio. Findings The findings show that the Gumbel copula is the best model for modeling the conditional dependence structure of the oil and stock markets in most cases. They also indicate that the best hedging strategy for oil price by stock market varies considerably over time, but this variation depends on both the index introduced and the model used. However, the conditional copula method with skewed student more effective than the other models to minimize the risk of oil-stock portfolio. Originality/value This research implication can be valuable for portfolio managers and individual investors who seek to make earnings by diversifying their portfolios. The findings of this study provide evidence of the importance of stock assets for making an optimal portfolio consisting of oil in the case of investments in oil and stock markets. This paper attempts to fill the voids in the literature on volatility among oil prices and stock markets in two important areas. First, it uses copulas to investigate the conditional dependence structure of the oil crude and stock markets in the oil exporting and importing countries. Second, it uses the dependence coefficients and conditional variance to calculate dynamic hedge ratios and risk-minimizing optimal portfolio weights for oil–stock.

The role of precious metals in extreme market conditions: evidence from stock markets

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sinem Guler Kangalli Uyar ◽  
Umut Uyar ◽  
Emrah Balkan
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Precious Metals ◽  
Market Condition ◽  
Time Varying ◽  
Safe Haven ◽  
Stock Market Returns ◽  
Content Type ◽  
Gold Silver

Purpose The purpose of this paper is to scrutinize three different points: How safe haven properties of precious metals (gold, silver, platinum and palladium) differentiate in two recent major crises such as the Global Financial Crisis (GFC) and the COVID-19 pandemic? How safe haven properties of precious metals change by the severity and the duration of shocks? and whether precious metals have hedge properties or not in normal conditions against different stock markets. Design/methodology/approach To analyze the time-varying behavior of precious metals with respect to stock market returns, the authors used the rolling window approach. After obtaining the time-varying beta series that way, the authors regressed the beta series on different severities of stock market shocks. Findings The findings show that the number of safe haven precious metals increases in the COVID-19 pandemic period compared to the GFC. Furthermore, the number of safe haven precious metals increases as the severity of shocks increases and the duration of them extended. Finally, in the absence of an extreme market condition, only gold has strong hedge asset properties. Originality/value To the best of the authors’ knowledge, this study is the first that examines the safe haven and hedge properties of all tradable precious metals against seven major stock markets. Besides this, it presents a comparative analysis for the safe haven properties of precious metals in terms of two major crises.

Quantifying the hedge and safe-haven properties of bond markets for cryptocurrency indices

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sitara Karim ◽  
Muhammad Abubakr Naeem ◽  
Nawazish Mirza ◽  
Jessica Paule-Vianez
Keyword(s):  
Design Methodology ◽  
Garch Model ◽  
Bond Markets ◽  
The Novel ◽  
Safe Haven ◽  
Content Type ◽  
Financial Firms ◽  
Regulatory Bodies ◽  
Uncertainty Indices ◽  
Practical Implications

PurposeThis study quantified the hedge and safe haven features of bond markets for multiple cryptocurrency indices from June 2014 to April 2021 to highlight whether bond markets offer hedging facilities to uncertainty indices of cryptocurrencies.Design/methodology/approachThe authors employed the methodology of Baur and McDermott (2010) and AGDCC-GARCH model to measure the hedge and safe-haven characteristics of three bond markets (BBGT, SPGB and SKUK) for three uncertainty indexes of cryptocurrencies (UCRPR, UCRPO and ICEA).FindingsThe authors find that bond markets are neither hedge nor safe havens except for SKUK which is a safe haven investment for cryptocurrency indices and offers substantial diversification during the periods of economic fragility. In addition, the hedge effectiveness of SPGB outperforms other bonds during crisis periods and provides sufficient diversification potential for cryptocurrency indices.Practical implicationsThe findings are important for policymakers, regulatory bodies, financial firms and investors in assessing hedge and safe haven characteristics of bond markets against cryptocurrency indices.Originality/valueEmploying the novel methodology of AGDCC-GARCH with three different bond markets and three uncertainty indices of cryptocurrencies, the current study adds to the existing strand of literature in terms of quantifying hedge and safe-haven attributes of bond markets for cryptocurrency uncertainty indexes.

Socially responsible investing: performance evaluation of BRICS nations

2020 ◽  
Vol 17 (4) ◽  
pp. 525-547
Author(s):  
Vanita Tripathi ◽  
Amanpreet Kaur
Keyword(s):  
Sustainable Development ◽  
Socially Responsible Investing ◽  
Socially Responsible ◽  
Content Type ◽  
Crisis Period ◽  
Responsible Investing ◽  
Brics Countries ◽  
Regulatory Bodies ◽  
The Impact ◽  
Asset Managers

PurposeThe study aims to contribute towards the sustainable development of financial systems, by testing the performance of socially responsible investing alternatives in emerging BRICS countries. The study outcomes give us an insight into viability of responsible financial decisions in contrast with the conventional style of investing.Design/methodology/approachThe authors examine the performance of socially responsible indices of BRICS nations vis-à-vis respective conventional market indices using various risk-adjusted measures and conditional volatility measures. We further segregate the 12-year study period to crisis and non-crisis period particular to the respective country, as well as a common global financial crisis period to analyze the impact of market conditions in BRICS nations and observe the performance using dummy regression analysis. Conditional volatility of the stochastic index series is measured using ARCH-GARCH analysis. Fama Decomposition Model helps rank the index performance through the sub-periods.FindingsFama Decomposition Model helps us observe that while Brazil secures a position in top rankers consistently, it is India that ranks top during crisis period. With evidence of outperformance in terms of risk-return by SRI indices of BRICS countries through the overall period as well as through different market conditions, our study contributes to the positive literature on socially responsible investing.Research limitations/implicationsThe study explores performance of SRI in BRICS and finds evidence of the sustainable investment to be non-penalizing to the investor, even as the performance trend remain distinct in the countries with same level of development. It has implications for the investors and asset managers to include responsible stocks, while for the companies and regulatory bodies to unite for better reporting and disclosures. Given the broad implications, future research is required to link the impact of various cultural, legislative and demographic factors on the level and performance of the socially responsible investment in BRICS nations.Practical implicationsThe current study evaluating and comparing performances of the socially responsible investments in BRICS nations puts forth following implications for the different sectors of the society, especially in emerging countries: (1) BRICS organization – The association of five economic giants, having significant influence over global as well as regional affairs, can aim to orient the countries' efforts towards collective sustainable development by designing uniform SRI framework. (2) Investors – In the globalization era, the investor can gain from ethical cross border investments to diversification and country benefits. (3) Companies and regulatory bodies – Only voluntary or mandatory unified efforts, to provide accurate and consistent disclosures, can upscale the mediocre growth trends of sustainable investing in emerging economies. (4) Asset Managers – Call of greater role in educating, warding off inhibitions related to RI.Originality/valueThis is to certify that the research paper submitted by us is an outcome of our independent and original work. We have duly acknowledged all the sources from which the ideas and extracts have been taken. The project is free from any plagiarism and has not been submitted elsewhere for publication.

Volatility spillover from the Chinese stock market to E7 and G7 stock markets

2019 ◽  
Vol 46 (1) ◽  
pp. 90-105 ◽  
Author(s):  
Berna Kirkulak Uludag ◽  
Muzammil Khurshid
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Volatility Spillover ◽  
Chinese Stock Market ◽  
G7 Countries ◽  
Content Type ◽  
Government Interventions ◽  
Vector Autoregressive ◽  
Optimal Weights ◽  
Hedge Ratios

PurposeThe purpose of this paper is to examine volatility spillover from the Chinese stock market to E7 and G7 stock markets. Using the estimated results, the authors also analyze the optimal weights and optimal hedge ratios for the portfolios including stocks from E7 and G7 countries.Design/methodology/approachThe authors employed generalized vector autoregressive-generalized autoregressive conditional heteroskedasticity approach, developed by Ling and McAleer (2003), in order to analyze daily data on the national stock indices. Considering the late establishment of some E7 stock markets, the sampling covers the period from 1995 through 2015.FindingsThe findings indicate significant volatility spillover from the Chinese stock market to E7 and G7 stock markets. In particular, the Chinese stocks highly co-move with the stocks of countries within a same geographical region. While the highest volatility spillover occurs between China and India among E7 countries, the highest volatility spillover occurs between China and Japan among G7 countries. Furthermore, the examination of optimal weights and hedge ratios suggest that investors should hold more stocks from G7 countries than E7 countries for their portfolios.Originality/valueTo the best of the authors’ knowledge, this is the first study which investigates the volatility spillover in the stock markets of G7 and E7 countries. Moreover, the current study contributes particularly to the existing limited literature on the Chinese stock market. Since the Chinese stock market is not fully integrated to other markets and it is subject to intense government interventions, there is a widely accepted belief that the contagion effects from the Chinese stock market to other stock markets are not influential. This view discourages and limits the prospect studies. However, the findings of this paper refute this view and indicate significant interaction among the Chinese stock market and E7 and G7 stock markets.

Hedging stock market prices with WTI, Gold, VIX and cryptocurrencies: a comparison between DCC, ADCC and GO-GARCH models

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohamed Fakhfekh ◽  
Ahmed Jeribi ◽  
Ahmed Ghorbel ◽  
Nejib Hachicha
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Multivariate Garch ◽  
Garch Models ◽  
Hedging Strategy ◽  
Market Prices ◽  
Content Type ◽  
Hedge Ratios ◽  
Multivariate Garch Models ◽  
Optimal Hedge

PurposeIn a first place, the present paper is designed to examine the dynamic correlations persistent between five cryptocurrencies, WTI, Gold, VIX and four stock markets (SP500, FTSE, NIKKEI and MSCIEM). In a second place, it investigates the relevant optimal hedging strategy.Design/methodology/approachEmpirically, the authors examine how WTI, Gold, VIX and five cryptocurrencies can be applicable to hedge the four stock markets. Three variants of multivariate GARCH models (DCC, ADCC and GO-GARCH) are implemented to estimate dynamic optimal hedge ratios.FindingsThe reached findings prove that both of the Bitcoin and Gold turn out to display remarkable hedging commodity features, while the other assets appear to demonstrate a rather noticeable disposition to act as diversifiers. Moreover, the results show that the VIX turns out to stand as the most effectively appropriate instrument, fit for hedging the stock market indices various related refits. Furthermore, the results prove that the hedging strategy instrument was indifferent for FTSE and NIKKEI stock while for the American and emerging markets, the hedging strategy was reversed from the pre-cryptocurrency crash to the during cryptocurrency crash period.Originality/valueThe first paper's empirical contribution lies in analyzing emerging cross-hedge ratios with financial assets and compare hedging effectiveness within the period of crash and the period before Bitcoin crash as well as the sensitivity of results to refits choose to compare between short term hedging strategy and long-term one.

scholarly journals Cryptocurrency as a safe haven for investment portfolios amid COVID-19 panic cases of Bitcoin, Ethereum and Litecoin

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mutaju Isaack Marobhe
Keyword(s):  
Global Health ◽  
Design Methodology ◽  
Predictive Power ◽  
The Novel ◽  
Structural Vector Autoregression ◽  
Safe Haven ◽  
Content Type ◽  
Stock Indices ◽  
Investment Portfolios ◽  
Structural Vector

PurposeThis article examines the susceptibility of cryptocurrencies to coronavirus disease 2019 (COVID-19) induced panic in comparison with major stock indices.Design/methodology/approachThe author employs the Bayesian structural vector autoregression to examine the phenomenon in Bitcoin, Ethereum and Litecoin from 2nd January 2020 to 30th June 2021. A similar analysis is conducted for major stock indices, namely S&P 500, FTSE 100 and SSE Composite for comparison purposes.FindingsThe results suggest that cryptocurrencies returns suffered immensely in the early days of the COVID-19 outbreak following declarations of the disease as a global health emergency and eventually a pandemic in March 2020. However, the returns for all three cryptocurrencies recovered by April 2020 and remained resistant to further COVID-19 panic shocks. The results are dissimilar to those of S&P 500, FTSE 100 and SSE Composite values which were vulnerable to COVID-19 panic throughout the timeframe to June 2021. The results further reveal strong predictive power of Bitcoin on prices of other cryptocurrencies.Research limitations/implicationsThe article provides evidence to support the cryptocurrency as a safe haven during COVID-19 school of thought given their resistance to subsequent shocks during COVID-19. Thus, the author stresses the need for diversification of investment portfolios by including cryptocurrencies given their uniqueness and resistance to shocks during crises.Originality/valueThe author makes use of the novel corona virus panic index to examine the magnitude of shocks in prices of cryptocurrencies during COVID-19.

Making investment decisions in stock markets using a forecasting-Markowitz based decision-making approaches

2019 ◽  
Vol 15 (2) ◽  
pp. 647-659 ◽  
Author(s):  
Zahra Moeini Najafabadi ◽  
Mehdi Bijari ◽  
Mehdi Khashei
Keyword(s):  
Decision Making ◽  
Time Series ◽  
Stock Markets ◽  
Time Series Prediction ◽  
Investment Decisions ◽  
Rate Of Return ◽  
Expected Returns ◽  
Prediction Methods ◽  
Content Type ◽  
Markowitz Model

Purpose This study aims to make investment decisions in stock markets using forecasting-Markowitz based decision-making approaches. Design/methodology/approach The authors’ approach offers the use of time series prediction methods including autoregressive, autoregressive moving average and artificial neural network, rather than calculating the expected rate of return based on distribution. Findings The results show that using time series prediction methods has a significant effect on improving investment decisions and the performance of the investments. Originality/value In this study, in contrast to previous studies, the alteration in the Markowitz model started with the investment expected rate of return. For this purpose, instead of considering the distribution of returns and determining the expected returns, time series prediction methods were used to calculate the future return of each asset. Then, the results of different time series methods replaced the expected returns in the Markowitz model. Finally, the overall performance of the method, as well as the performance of each of the prediction methods used, was examined in relation to nine stock market indices.

Sign in / Sign up

Export Citation Format

Share Document