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Exploring the Dynamic Links between GCC Sukuk and Commodity Market Volatility

Department of Finance and Investment, Al Imam Mohammad Ibn Saud Islamic University (IMSIU), P.O. Box 5701, Riyadh, Saudi Arabia
Int. J. Financial Stud. 2018, 6(3), 72; https://doi.org/10.3390/ijfs6030072
Received: 1 May 2018 / Revised: 16 July 2018 / Accepted: 1 August 2018 / Published: 13 August 2018
This study investigates the impact of commodity price volatility (including soft commodities, precious metals, industrial metals, and energy) on the dynamics of corporate sukuk returns. Using a sample of sukuk indices from Gulf Cooperation Council (GCC) countries, we study the dynamic conditional correlation using a multivariate generalized autoregressive conditional heteroskedasticity dynamic conditional correlation (GARCH-DCC) process. Empirical results show a time-varying negative correlation between GCC sukuk returns and commodity prices. In fact, a negative conditional correlation among assets of a given portfolio implies higher gain-to-risk ratios. An understanding of volatility and dynamic co-movements in financial and commodity markets is important for portfolio allocation and risk management practices. View Full-Text
Keywords: sukuk; commodity prices; dynamic conditional correlation; Islamic finance sukuk; commodity prices; dynamic conditional correlation; Islamic finance
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Naifar, N. Exploring the Dynamic Links between GCC Sukuk and Commodity Market Volatility. Int. J. Financial Stud. 2018, 6, 72.

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