How media coverage news and global uncertainties drive forecast of cryptocurrencies returns?

This paper aims to investigate the impact of global financial, economic, and gold price uncertainty indices (VIX, EPU, and GVZ) and investor sentiment based on media coverage news on the returns of Bitcoin and Ethereum during the COVID-19 pandemic. We adopt an asymmetric framework based on the Quantile-on-Quantile approach, which examines the quantiles of the cryptocurrency returns, investor sentiment, and the various uncertainties indicators. The empirical findings suggest that the COVID-19 pandemic has significantly impacted cryptocurrency returns. Specifically, (i) the results demonstrate the predictive power of Economic Policy Uncertainty (EPU) during this period, as evidenced by a strong negative association between EPU and cryptocurrency returns across all quantiles; (ii) the correlation between cryptocurrency returns and the VIX index was negative but weak, across various quantile combinations of Ethereum and Bitcoin returns; (iii) an increase in COVID-19 news negatively affected Bitcoin returns across all quantiles; (iv) Bitcoin and Ethereum cannot be relied upon as effective hedging tools against global financial and economic uncertainty during the COVID-19 pandemic. Studying the behavior of cryptocurrency during uncertainty like pandemics is extremely important because it provides investors with insights on diversifying their portfolios and hedging their risks.

Sukuk returns dynamics under bullish and bearish market conditions: do COVID-19 related news and government measures matter?

The rapid and far-reaching spread of COVID-19 related news can alter investors' perceptions and investment behaviour and affect security returns. We investigate this hypothesis by studying the impact of COVID-19 related news (panic news, media-hype new, fake news, infodemic, and Stringency measures) and alternative measures of COVID-19 developed by Narayan et al. (2021) on Sukuk returns during different market conditions. Empirical results show asymmetric comovement between global Sukuk returns, panic news, travel bans, and the percentage of information about the novel COVID-19 pandemic. Moreover, the COVID-19 news affects the Sukuk returns only when the sukuk markets are bearish. The Sukuk returns are not affected by medical and vaccine information, and the aggregate COVID-19 index that captures the pandemic sentiment.

Multilayer information spillover networks between oil shocks and banking sectors: Evidence from oil-rich countries

There is no doubt that oil price shocks significantly affect oil-producing countries' macroeconomic fundamentals and financial stability, mainly in crisis times. The recent oil price shocks, coupled with the COVID-19 pandemic, motivated us to investigate the connectedness and risk transmission among oil shocks and banking sectors in the Gulf Cooperation Council (GCC) economies from June 30, 2006, to September 9, 2021. Thus, we construct multilayer information spillover networks between oil price shocks and GCC banking sectors. The empirical results show that the Bahrain banking sector depicts the highest connectedness and risk transmission with oil price shocks on the extreme risk spillover layer. In addition, Kuwait and the United Arab Emirates are highly connected to oil demand shocks. Furthermore, we find a substantial increase in extreme risk spillover and volatility spillover layers during the COVID-19 period. The results of this paper have some important implications for regional portfolio risk management, alleviating systemic risk, and developing hedging and investment strategies.

An Examination of Whether Gold-backed Islamic Cryptocurrencies are Safe Havens for International Islamic Equity Markets

This study investigated the safe-haven role of two gold-backed Islamic cryptocurrencies, i.e., OneGram Coin (OGC) and X8X Token (X8X), for 15 Islamic equity indices at the global, regional, and country levels. For this purpose, we used four-moment modified value at risk, dynamic conditional correlation-based hedge and safe-haven hypotheses, directional spillover in quantiles, and daily data from February 17, 2019, to May 5, 2021, including the post-pandemic period from February 1, 2020, to May 5, 2021. Based on the findings, OGC was a strong safe-haven for several Islamic equity markets, especially during the COVID-19 pandemic. We also constructed two novel polarity and subjectivity measures using natural language processing, which indicated that when negativity in the market (e.g., polarity, subjectivity, and economic/market uncertainty) is higher on social media platforms, OGC produces positive returns in order to reduce the losses in equity indices. These results hold after controlling for trading volume.

How COVID-19 pandemic, global risk factors, and oil prices affect Islamic bonds (Sukuk) prices? New insights from time-frequency analysis

This paper studies the time?frequency co-movement among Islamic bond (Sukuk) prices, the recent spread of COVID-19, oil prices, economic policy uncertainty, global financial uncertainty, and global financial distress. The Dow Jones Sukuk Index (hereafter DJSI) is used as a proxy of the global Sukuk market. The Malaysian Sovereign Sukuk index is also used for comparison purposes because Malaysia maintains a leading position as the strongest global player in Islamic finance. The effect of global risk and uncertainty factors on Sukuk prices is controlled for using partial wavelet coherency. The empirical results indicate that the co-movements between the Sukuk prices (both global and Malaysian Sukuk) and global economic and financial risk factors are time and frequency varying. We also find that global and Malaysian Sukuk markets behave differently with global risk factors throughout the COVID-19 pandemic period. Furthermore, we find that the co-movement between Sukuk prices (both global and Malaysian Sukuk) and COVID-19-infected cases is stronger only in the short term.

Are Islamic indexes, Bitcoin and gold, still “safe-haven” assets during the COVID-19 pandemic crisis?

Purpose>This paper aims to investigate whether Islamic indexes, Bitcoin and gold still act as hedges or/and “safe-haven” assets during the COVID-19 pandemic crisis. This paper examines the role of the Morgan Stanley Capital International all-country world index, Islamic index, gold and Bitcoin as a hedge or safe-haven asset for the world conventional stock market over the period from April 30, 2015 to March 27, 2020.Design/methodology/approach>In this paper, the authors re-evaluate the hedge and safe haven properties of Islamic indexes, gold and Bitcoin following Baur and Lucey’s (2010) and Baur and McDermott’s (2010) methodology.Findings>Empirical results show that the Islamic index is not a hedge or a safe haven asset for the world conventional stock market during the recent coronavirus crisis period. Different from the whole period, the authors find that gold is a strong hedge but only a weak safe or is not a safe haven during the coronavirus sub-period. Bitcoin reports distinctive properties, as it acts as a weak hedge and not a safe-haven asset.Originality/value>This paper is the first study that investigates whether the global Islamic index still acts as hedges or “safe-haven” assets during the new COVID-19 crisis period. The results can help investors make informed decisions when adding cryptocurrencies and Islamic indexes to their portfolios during the coronavirus crisis.

Dependence structure and dynamic connectedness between green bonds and financial markets: Fresh insights from time-frequency analysis before and during COVID-19 pandemic

This paper examines the interdependence between green bonds and financial markets in the time-frequency domain by utilizing the multivariate wavelet approach and dynamic connectedness through combining Ensemble Empirical Mode Decomposition (EEMD) with Diebold and Yilmaz (2012) spillover framework. The findings of wavelet multiple correlations indicate that the benefits of diversification opportunities are more evident in the short run. The evidence of wavelet multiple cross-correlations reveals that green bonds and financial markets are highly integrated in the long run. The results of the static connectedness framework explain that the direction and magnitude of spillover behave differently across markets. The world stock market is the net spillover transmitter, while the corporate bond market is the net spillover receiver among the selected markets. The green bond market is receiving more but transmitted less volatility in the present study. The evidence on dynamic connectedness measured by the rolling window approach shows that the interconnection between green bonds and financial markets is volatile over time. These pieces of evidence provide implications to global investors having a strong position in the green bonds market in terms of risk management and portfolio decisions.

Dependence dynamics of Islamic and conventional equity sectors: What do we learn from the decoupling hypothesis and COVID-19 pandemic?

The recent COVID-19 pandemic intensification generates a different set of challenges for global financial markets and portfolio management strategies. This paper uses network analysis to investigate the static and dynamic dependence within Islamic and conventional equity sectors. The study focuses on the decoupling hypothesis and how the dependence among sectors changes during COVID19. Empirical findings indicate a higher degree of spillover during the COVID19 sub-period. Islamic and conventional equities behave differently in terms of industry-level dependence during normal and crisis times, thus decoupling. Further, the dependence effect between conventional equity returns is stronger than Islamic equity returns during the COVID-19 pandemic. The finding of this paper has several significant implications for portfolio selection and risk management. Portfolios consisting of Islamic equity sectors including industrials, basic materials, consumer services, and technologies highlight low-diversification benefits across the entire sample period. Also, investment exposure to less connected Islamic and conventional equity sectors provides a good diversification strategy.

Energy markets and green bonds: A tail dependence analysis with time-varying optimal copulas and portfolio implications

We examine the asymmetric and extreme tail dependence between five energy markets (crude oil, natural gas, heating oil, gasoline, and coal) and green bonds using a time-varying optimal copula (TVOC) model. The results indicate the existence of multiple tail dependence regimes, implying the unsuitability of applying static or dynamic models to entirely describe the extreme dependence between energy markets and green bonds. There is an extreme negative tail dependence between green bonds and four energy commodities (crude oil, heating oil, gasoline, and coal), whereas an extreme positive tail dependence is shown for green bonds and natural gas. Largely, stressful periods such as the COVID19 outbreak, shape the tail dependence, which is also the case for extreme risk spillovers involving, especially, crude oil. Hedging effectiveness analysis indicates that green bonds can effectively hedge most of the energy commodities. The conditional diversification benefits seem to vary with time, especially for natural gas, and differ across the energy markets. Notably, green bonds provide higher conditional diversification benefits when combined with coal for several portfolio weights.

Tail event-based sovereign credit risk transmission network during COVID-19 pandemic.

This paper investigates the interconnectedness between sovereign credit risk based on the tail event and network dynamics technique. Specifically, we examine the interdependence in upper tails of sovereign credit default swap in the case of fifteen most COVID-19 affected countries. Empirical findings indicate that connectedness among SCDS spreads changed over time and is higher during the COVID19 outbreak. Russia, Brazil, and China are the most credit risk emitter and receiver during the COVID-19 pandemic.