Author: Adil and colleague
The COVID-19 pandemic has had far-reaching effects beyond the health sector, reshaping social and economic systems around the world. This study examined how Islamic stock markets reacted to the crisis and how volatility patterns changed before and during the pandemic. Using an event study methodology combined with the GARCH model, the research analyzed nine Islamic stock indices from across the globe, drawing data from the Thomson Reuters database. This approach provided insights into both immediate market reactions and the persistence of risk within Islamic financial markets.
The findings reveal that in the short term, the Islamic Australian stock index and the Islamic GCC stock index-maintained stability during the first fifteen days following the announcement of the pandemic. In contrast, indices from Qatar, the UAE, ASEAN, MENA, MENASA, and Bahrain experienced significant short-term impacts. The study also highlights that once the World Health Organization officially declared COVID-19 a global health crisis, volatility in Islamic stock markets increased substantially. More importantly, these volatility shocks persisted for an extended period, signaling prolonged uncertainty within the markets.
These results are closely linked to the United Nations Sustainable Development Goal 8: Decent Work and Economic Growth, which emphasizes the importance of building resilient financial systems that support sustainable economic development. By understanding the vulnerabilities and stability patterns of Islamic stock indices during global crises, policymakers and financial institutions can design strategies that enhance market resilience. Strengthening these mechanisms will not only protect investors but also contribute to sustainable economic recovery in the face of future shocks.
 Read the full article here to explore the detailed findings and their implications for policymakers and practitioners.