Are Islamic investments still safe assets during the COVID‐19 pandemic?

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Abstract
While looking for safe‐haven assets, the literature obtained mixed and varying results, changing from one period to the next, or one geographical area to another. Recently, this field of research grew even more, motivated by the changing environment resulting from the global financial crisis and the current COVID‐19 pandemic. We compare five Islamic and five conventional leading financial indexes for the period 2004–2020, covering both global and regional data (Asia‐Pacific, Europe, GCC, and the United States). By employing DCC GARCH and extended GARCH (1,1) models, we find a lower volatility and higher persistence in Islamic indexes when compared to their conventional alternatives, holding also when traditional safe‐haven assets are included in comparative terms and across geographical areas. We therefore provide robust evidence on the consistent behavior of Islamic assets: Their defensive properties remain and are even stronger in the current unprecedented and ongoing crisis.

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