The Efficiency of Sukuk Indices by Different Tenures Following the 2008-Financial Crisis

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The Efficiency of Sukuk Indices by Different Tenures Following the 2008-Financial Crisis

July 30, 2022 BUSINESS & ECONOMICS 0


The Islamic capital market’s sukuk market has expanded and changed dramatically. The value of sukuk assets was negatively impacted by the worsening economic situations of several nations during the global financial crisis of 2008, particularly Malaysia, the country with the largest sukuk market in the world. Following the 2008 financial crisis, there was a 33 percent drop in worldwide sukuk issuance overall, which complicated matters for sukuk investors (who viewed sukuk as a dangerous investment) and led to an increase in sukuk defaults. Additionally, the extreme volatility affects long-term effectiveness. All sukuk indexes receive daily data from the Dow Jones Sukuk 1-3 Year Total Return Index (DJSUK3TR) and Dow Jones Sukuk 7-10 Year Total Return Index (DJSUK7TR) (DJSUK10TR). This study examines the several types of sukuk market efficiency before, during, and after the 2008 global financial crisis using the GARCH-in-Mean (GARCH-M) model. The analyses make use of the Random Walk model and the Efficient Markets Hypothesis (EMH). According to the findings, the long-term sukuk index (DJSUK10TR) offers the most accurate market performance analysis. The sukuk market is viewed as being inefficient overall. In conclusion, the findings will give issuers, policymakers, regulatory authorities, and investors confidence to invest in and issue sukuk and will provide useful information and advice. The empirical contributions in this study show how important sukuk is in motivating investors to invest in sukuk to increase investment and economic growth.

Author(s) Details:

Syazwani Abd Rahim,
Academy of Contemporary Islamic Studies (ACIS), Universiti Teknologi MARA Cawangan Johor, Kampus Segamat, KM.12, Jalan Muar, 85000 Segamat, Johor, Malaysia.

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Keywords: Sukuk, market efficiency, sukuk indices, tenures, GARCH-M


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