Sukuk and Bond Puzzle: An Analysis with Characteristics Matched Portfolios

Mohammed Hossain, Md Hamid Uddin, Sarkar Kabir

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)
506 Downloads (Pure)


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)3792-3817
Number of pages26
JournalEmerging Markets Finance and Trade
Issue number13
Early online date4 Jan 2020
Publication statusPublished - 2021

Bibliographical note

This is an Accepted Manuscript of an article published by Taylor & Francis in Emerging Markets Finance and Trade on 04/01/2020, available online:

Copyright © and Moral Rights are retained by the author(s) and/ or other copyright owners. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This item cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder(s). The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders.


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

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance(all)


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