VOLATILITY BEHAVIOUR AND ASYMMETRIC NEWS EFFECT DURING 2008 GLOBAL FINANCIAL CRISIS: EVIDENCE FROM DJSI

Abstract

The sukuk market in the Islamic capital market has undergone significant evolution and development. During the 2008 global financial crisis, the deteriorating economic condition of countries, especially Malaysia as the biggest sukuk market in the world, adversely affected the value of sukuk investments. The decrease of 33 percent in total global sukuk issuance after the 2008 crisis generated a complicated situation among sukuk investors (classified sukuk as a risky investment), then increased the number of sukuk defaults. The objective in this study is to observe the volatility behaviour of the DJSI with risk/return tradeoff as the proxy of risk for the period under study based on GARCH-family models. The findings will provide valuable information, guidelines and give confidence to issuers, policymakers, regulatory bodies, and investors to invest and issue sukuk (Islamic bond). The empirical contributions in this study show the importance of sukuk to encourage investors to invest in sukuk to increase economic growth and investment.