Are Sukuk Securities the Same as Conventional Bonds?

Proceedings of Foundation of Islamic Finance Series, Second Conference, Kuala Lumpur, Malaysia, March 8-10, 2011

31 Pages Posted: 14 Mar 2011  

Meysam Safari

SEGi University

Multiple version iconThere are 2 versions of this paper

Date Written: March 2011

Abstract

Sukuk securities have some similar features with bond securities. These similarities have been highlighted so the financial press has described these securities to be similar to conventional bonds, despite important differences of these securities. This paper investigates this matter empirically by first examining the yield to maturities of sukuk securities and conventional counterparts for various issuers and maturities. Our results show a significant yield difference between sukuk and conventional bonds of same quality and term. Moreover, results of Granger causality test do not show a general causal relation between yields these two types of securities. Some differences between yield curves of Islamic securities and conventional bonds of different types of issuers are identified in the Bursa Malaysia. Finally, effect of issuance of ijarah sukuk on issuing firm’s beta is studied. The results shows that the absolute change in beta of the firm is significant, which needs careful interpretation.

Keywords: Sukuk, Bonds, Yield curve, Yield to maturity, Islamic finance

JEL Classification: Z10

Suggested Citation

Safari, Meysam, Are Sukuk Securities the Same as Conventional Bonds? (March 2011). Proceedings of Foundation of Islamic Finance Series, Second Conference, Kuala Lumpur, Malaysia, March 8-10, 2011 . Available at SSRN: https://ssrn.com/abstract=1783551 or http://dx.doi.org/10.2139/ssrn.1783551

Meysam Safari (Contact Author)

SEGi University ( email )

Taman Sains Selangor,
Kota Damansara, PJU 5,
Petaling Jaya,, Selangor 47810
Malaysia

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