Assessing the impact of media sentiment on the returns of sukuks during the Covid-19 crisis

ABSTRACT

The wavelet approach covering simultaneously the time and frequency domains is employed to study the impact of the Covid-19 coverage in mass media on the performance of the Dow Jones Sukuk investment grade total return indices. The overall coherence level for the media-coverage – sukuk pairs is found to increase with the investment horizon. Multiple time-frequency regions with low level of coherence, observable along the Covid-19 systemic crisis, imply attractive diversification attributes of investing in Islamic fixed-income securities especially in times of financial stress and turmoil. We investigate coherence and phase difference patterns, which differ for distinct maturity buckets of the Sukuk indices, further highlighting their potentiality for the downside risk hedge, workable under economic and financial distress.

Highlights

• The influence of the Covid-19 coverage in social media on DJ sukuk indices is investigated.

• The wavelet approach is employed to study the interrelations via coherence/phase-difference metrics.

• Coherence level varies along the time and frequency scales, increasing with the investment horizon.

• We observe differences in the coherence patterns per maturity bucket of Shariah-compliant securities.

• Hedging attractiveness is less pronounced in the sukuks of 1 to 3 years of residual maturity.

• The findings are potentially insightful for engineering hedge strategies, based in sukuks.

• Sukuks possess valuable hedging attributes, non-vanishing during systemic crisis events.

KEYWORDS:

• Covid-19
• Islamic fixed-income securities
• DJ sukuk indices
• media sentiment
• social media coverage
• wavelet analysis
• leads-and-lags; comovements

JEL CLASSIFICATION:

• C22
• C58
• G01
• G10
• G11
• G15
• G19

Acknowledgement

This work was supported by the Russian Science Foundation under grant 22-18-00276, https://rscf.ru/project/22-18-00276/.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data that support the findings of this paper are available on request.

Notes

¹ Source: Islamic Finance 2020–2021: COVID-19 Offers An Opportunity For Transformative Developments. www.spglobal.com.

² Source: www.istitutohalal.com.

Additional information

Funding

This work was supported by the Russian Science Foundation under grant [22-18-00276], https://rscf.ru/project/22-18-00276/.