Decoding investment strategies across agricultural commodities, Islamic equities, and Sukuk markets

Abstract

This study develops a novel quantile time-frequency connectedness framework that enables the investigation of different investment strategies among agricultural commodities, Islamic equities, and Sukuk markets. Additionally, the study analyses relative variation of price quotations using (DCC-t-Copula) to identify the ideal portfolio weights and hedging ratios between agricultural commodities, Islamic equities, and Sukuk markets. This approach helps us understand connectedness patterns between the underlying variables under different market conditions. To this end, the study utilised the dynamic quantile time-frequency spillover approach to examine connectedness and investment strategies among ten agricultural commodities, six Islamic stock market indices, and five pre-eminent Sukuk indices. Empirical findings indicate that farming commodities and Islamic sukuk indices are mainly the net receivers of shocks. In contrast, the Islamic equity markets are the main net transmitters during the short and long run under normal market conditions. We also find that the total connectedness index among the selected indices is higher during the short-run dynamics than the long-run at different quantiles considered in the study. These findings will help investors, financial analysts, regulators, and portfolio managers understand comovements and volatility spillover patterns among the Islamic equity indices, Sukuk, and agricultural commodities to manage risk and portfolio diversification.