Searching for Safe Havens during the COVID-19 Pandemic: Determinants of Spillovers between Islamic and Conventional Financial Markets

Abstract

We analyse the impact of the COVID-19 pandemic on spillover between conventional and Islamic stock and bond markets. We further analyse comparatively whether gold, oil, and Bitcoin prices, VIX and EPU index affect the relationships between these markets during the COVID-19 pandemic. The results show that the Islamic bonds (Sukuk) demonstrate safe haven properties during this pandemic, while the spillovers between conventional and Islamic stock markets become stronger during the pandemic. COVID-19, Oil and gold are strong predictors of conventional-Islamic markets spillovers, while Bitcoin is not a significant determinant of these relationships.

Keywords: COVID-19, spillover effect, Islamic markets, gold, oil, Bitcoin

JEL Classification: C58; F3; G15