Title: Asymmetric stock-bond interrelationships in Islamic markets: EEMD-based frequency-dependent and causality analyses

Authors: Ahmed Bossman; Peterson Owusu Junior; Anokye Mohamed Adam; Samuel Kwaku Agyei

Addresses: Department of Finance, School of Business, University of Cape Coast, New Administration Block, Cape Coast, Ghana ' Department of Finance, School of Business, University of Cape Coast, New Administration Block, Cape Coast, Ghana ' Department of Finance, School of Business, University of Cape Coast, New Administration Block, Cape Coast, Ghana ' Department of Finance, School of Business, University of Cape Coast, New Administration Block, Cape Coast, Ghana

Abstract: We examine the stock-bond interrelations using decomposed return series of stocks and bond yield in Islamic markets. We aim to establish the bi-directional relationships between the two assets classes amid the financial market turmoil consequentially presented to the world by the COVID-19 pandemic. We employ the ensemble empirical mode decomposition and quantile-in-quantile regression techniques to daily data between 23 November 2015 and 8 September 2021. We reveal that the stock-bond connection is bi-directional and varies across quantiles in Islamic markets. We submit that in the medium – long-term of market stress, Islamic stocks and bonds are negatively interrelated and offer diversification opportunities to international investors who seek to maximise returns on their portfolio whiles minimising risks. The Pakistani market has few exceptions in the medium-term. We additionally find that stocks and bonds in Indonesia, Malaysia and Qatar can be diversifiers across all market conditions. The study's implications are further discussed.

Keywords: ensemble empirical mode decomposition; EEMD; QQR; Islamic markets; quantile-in-quantile regression.

DOI: 10.1504/GBER.2023.131197

Global Business and Economics Review, 2023 Vol.28 No.4, pp.388 - 424

Received: 17 Jan 2022
Accepted: 17 Apr 2022
Published online: 01 Jun 2023 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article