Financial market risks during the COVID-19 pandemic

Omair Haroon, Mohsin Ali, Abdullah Khan, Mudeer A. Khattak, Syed Aun R. Rizvi

Research output: Contribution to journalArticleResearchpeer-review

50 Citations (Scopus)


This article examines the nature of time-varying systematic risk for both Islamic and non-Islamic sectoral indices during COVID-19. The novelty lies in the analysis of behavioral changes in beta as the global health crisis moved from an epidemic to a pandemic. Using daily stock market return data on 10 different industry sectors, we show that both Islamic and conventional indices depict a similar pattern, but Islamic equities exhibit lower risk, indicating a subdued reaction to market movements. However, as the COVID-19 evolves from an epidemic to a pandemic the trend changes, with Consumer Services, Financials, Healthcare, and Oil & Gas sector betas depicting an overreaction in Islamic equities. These results remain robust to multiple additional tests. On this basis, we argue that a lower systematic risk of Islamic equities can offer portfolio diversification opportunities.

Original languageEnglish
Pages (from-to)2407-2414
Number of pages8
JournalEmerging Markets Finance and Trade
Issue number8
Publication statusPublished - 2021
Externally publishedYes


  • Beta
  • COVID-19
  • equity indices
  • Islamic finance
  • systematic risk

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