Sukuk and Bond Puzzle: An Analysis with Characteristics Matched Portfolios

Mohammed Hossain, Md Hamid Uddin, Sarkar Kabir

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)


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 languageEnglish
Pages (from-to)(In-press)
Number of pages27
JournalEmerging Markets Finance and Trade
Early online date4 Jan 2020
Publication statusE-pub ahead of print - 4 Jan 2020


  • Conventional bond
  • G10
  • G12
  • industry performance
  • sukuk
  • sukuk performance

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance(all)

Fingerprint Dive into the research topics of 'Sukuk and Bond Puzzle: An Analysis with Characteristics Matched Portfolios'. Together they form a unique fingerprint.

Cite this