Network connectedness of the term structure of yield curve and global Sukuks

Document Type

Article

Source of Publication

Pacific-Basin Finance Journal

Publication Date

5-1-2023

Abstract

This paper explores the connectedness between the returns and volatilities of the conventional and Islamic bond markets. We use the level, slope, and curvature of the US yield curve and estimate the connectedness of these factors with the Dow Jones Islamic indices (of 3 to 10 years of maturity) as well as the minimum connectedness portfolio. The static analysis shows that level and slope of the conventional yield curve are the net transmitters of shocks while the Islamic indices have been mostly at the receiving end. The dynamic connectedness analysis shows a varying degree of the connectedness over the full sample period characterized by distinctive trajectories of booms and busts. The pairwise connectedness analysis also confirms that level and slope are the net transmitters in the system with an exception in most recent times of Covid-19 pandemic. The findings have implications for the researchers, policy makers, regulators, shariah boards, investors, and fund managers.

ISSN

0927-0585

Publisher

Elsevier BV

First Page

102056

Last Page

102056

Disciplines

Business

Keywords

Spillover, Connectedness, Yield curve, Sukuk bonds, Financial crisis, C53, E43, G12, G15

Indexed in Scopus

no

Open Access

no

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