Abstract
A sukuk is an Islamic financial asset structured to offer investors a cash flow equivalent to that of a bond. The difference between them is in their contractual mechanism: a bond constitutes a lender–borrower relationship between the holders and issuers whereas a sukuk constitutes a lessor-lessee, buyer-seller, or a partnership relationship. Therefore, we examine whether they are different assets in terms of their return and risk profile. Given the difference between them, it is also important to identify what drives sukuk returns. The study finds that sukuk returns are insignificantly different from those of bonds but have significantly higher risk. However, we find that sukuk investors are not sufficiently compensated for the higher risk. Overall, our study finds that sukuks’ market performance is unrelated to bond market performance, but the market performance of the industry in which the sukuk-financed project originates has a significant effect on sukuk performance.
| Original language | English |
|---|---|
| Pages (from-to) | (In-press) |
| Number of pages | 27 |
| Journal | Emerging Markets Finance and Trade |
| Volume | (In-press) |
| Early online date | 4 Jan 2020 |
| DOIs | |
| Publication status | E-pub ahead of print - 4 Jan 2020 |
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Keywords
- Conventional bond
- G10
- G12
- industry performance
- sukuk
- sukuk performance
ASJC Scopus subject areas
- Finance
- Economics, Econometrics and Finance(all)
Cite this
Sukuk and Bond Puzzle: An Analysis with Characteristics Matched Portfolios. / Hossain, Mohammed ; Uddin, Md Hamid ; Kabir, Sarkar.
In: Emerging Markets Finance and Trade, Vol. (In-press), 04.01.2020, p. (In-press).Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Sukuk and Bond Puzzle: An Analysis with Characteristics Matched Portfolios
AU - Hossain, Mohammed
AU - Uddin, Md Hamid
AU - Kabir, Sarkar
PY - 2020/1/4
Y1 - 2020/1/4
N2 - A sukuk is an Islamic financial asset structured to offer investors a cash flow equivalent to that of a bond. The difference between them is in their contractual mechanism: a bond constitutes a lender–borrower relationship between the holders and issuers whereas a sukuk constitutes a lessor-lessee, buyer-seller, or a partnership relationship. Therefore, we examine whether they are different assets in terms of their return and risk profile. Given the difference between them, it is also important to identify what drives sukuk returns. The study finds that sukuk returns are insignificantly different from those of bonds but have significantly higher risk. However, we find that sukuk investors are not sufficiently compensated for the higher risk. Overall, our study finds that sukuks’ market performance is unrelated to bond market performance, but the market performance of the industry in which the sukuk-financed project originates has a significant effect on sukuk performance.
AB - A sukuk is an Islamic financial asset structured to offer investors a cash flow equivalent to that of a bond. The difference between them is in their contractual mechanism: a bond constitutes a lender–borrower relationship between the holders and issuers whereas a sukuk constitutes a lessor-lessee, buyer-seller, or a partnership relationship. Therefore, we examine whether they are different assets in terms of their return and risk profile. Given the difference between them, it is also important to identify what drives sukuk returns. The study finds that sukuk returns are insignificantly different from those of bonds but have significantly higher risk. However, we find that sukuk investors are not sufficiently compensated for the higher risk. Overall, our study finds that sukuks’ market performance is unrelated to bond market performance, but the market performance of the industry in which the sukuk-financed project originates has a significant effect on sukuk performance.
KW - Conventional bond
KW - G10
KW - G12
KW - industry performance
KW - sukuk
KW - sukuk performance
UR - http://www.scopus.com/inward/record.url?scp=85078612474&partnerID=8YFLogxK
U2 - 10.1080/1540496X.2019.1706478
DO - 10.1080/1540496X.2019.1706478
M3 - Article
VL - (In-press)
SP - (In-press)
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
SN - 1540-496X
ER -