Dynamic Connectedness between Islamic Mena Stock Markets and Global Factors


  • Pinar Evrim Mandaci Dokuz Eylul University, Turkey
  • Efe Caglar Cagli Dokuz Eylul University, Turkey




Islamic stock index, Dynamic connectedness, Volatility spillover, Hedging, Portfolio strategy


This article examines the volatility spillover from the regional and global Islamic stock markets, global conventional stock market, global commodity markets including oil and gold, and the US long-term interest rates into the Islamic stock and sukuk markets of a selected group of the Middle East and North Africa (MENA) nations. We implement the Diebold and Yilmaz (2012, 2014) spillover index, refined with time-varying parameter vector autoregressions (TVP-VAR) of Antonakakis, Chatziantoniou, and Gabauer (2020), on daily data between November 3, 2009 and November 1, 2019. We explore that the volatility spillovers among the Islamic markets are prominently low, posing poorly connected with the sukuk market, global Islamic, and conventional stock markets. Our results support the decoupling hypothesis of Islamic stock markets from the conventional stock market; as it follows, the US investors, who add to their portfolios certain Islamic stocks of the MENA countries, may benefit to a large extent from those diversifications. This study is among a few studies deploying country-level data, choosing its locus of the Islamic stock markets in the MENA region. The study is the first one examining the potential risk transmission from global factors to both the Islamic stock markets and the Global sukuk market. The econometric framework is, for the first time, used to investigate the volatility spillovers between the global factors and the Islamic markets.


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How to Cite

Evrim Mandaci, P., & Cagli, E. C. (2021). Dynamic Connectedness between Islamic Mena Stock Markets and Global Factors. International Journal of Economics, Management and Accounting, 29(1), 93–127. https://doi.org/10.31436/ijema.v29i1.817