The Impact of COVID-19 pandemic on Islamic and conventional financial markets: International empirical evidence

The current global COVID-19 pandemic is adversely affecting financial markets, including commodities, conventional stocks, and Islamic stocks. This paper empirically investigates the extent to which COVID-19 effects may drive interdependence in markets. We fit copulas to pairs of returns before and during the ongoing epidemic shock, analyze the observed changes in the dependence structure, and discuss asymmetries on the propagation of crisis. We also use the findings to construct portfolios possessing desirable expected behavior. We find that the dependence structure changes significantly during the global pandemic providing valuable information on how the COVID-19 crisis affects inter-dependencies. The selected portfolio, including gold and Islamic return indices, has the best performance outside the COVID-19 crisis, and slightly more performing during the bear markets validating gold's intrinsic characteristic to be a safe haven. However, the portfolio performances, when combining the Brent with Islamic or conventional indices, have the same trend for the whole period. Our findings contribute to help investors better adjust their investment strategies.

Emerging and advanced economies markets behaviour during the COVID‐19 crisis era

This article examines the consequences of the COVID‐19 crisis on the interdependencies between emerging and advanced economies. Using daily market index data from 22 developed and emerging markets, we develop a combination of statistical methods based on Diebold and Yilmaz spillover index and Toda–Yamamoto and Dolado and Lütkepohl causality approach. The results substantiate an increase in the interdependence between emerging and advances economies, which suggests an increase in the transmission of the stress and uncertainty between financial markets during the pandemic period. Our findings show that the emerging countries are affected by the financial markets of advanced economies during the COVID‐19 crisis and, in particular, by European markets, which appear to be the primary driver of contagion and transmission of stress and uncertainty to all other regional markets.

The unprecedented reaction of equity and commodity markets to COVID-19

Using a drifting spillover index approach (Diebold and Yilmaz, 2012) and a continuous time-frequency tool (Torrence and Webster, 1999), this paper attempts an empirical investigation of the spillovers and co-movements among commodity and stock prices in the major oil-producing and consuming countries. While our results point to the existence of a significant interdependence among the markets considered, Chinese and Saudi Arabian stock markets seem to be weakly integrated into the world market. Moreover, the spillovers are time-varying and reached their highest levels during the COVID-19 medical shock.