A SECTORIAL ANALYSIS OF SUKUK MARKET BASED ON DETERMINANTS OF RISK AND RETURN PERFORMANCES

Abstract

The present study attempted to identify different types of risks embedded in sukuk structure and to determine the impact of different types of risks on return of sukuk. Further, this study has also attempted to explore the relationship between market risk, credit risk, operational risk, liquidity risk and sukuk returns. Researcher collected data from the year 2005 to 2013. Data were collected on periodic basis for determining the impact of the diverse risks on sukuk returns daily. This study analyzed the data using line charts, descriptive statistics, correlation analysis, and regressions i.e. ordinary least square with F and t statistics. Results of this study revealed that NASDAQ sectorial basis sukuk index found to have four models which explain from 84% to 91 % of variations in returns. As such global sukuk return, sovereign sukuk return, corporate sukuk return and financial sukuk return are explained by 84%, 91%, 86% and 88% respectively. These results might also be affected by interest rate risk, inflation risk, dollar rate risk, maturity risk, credit risk & default risk, legal & Shari’ah compliance risk, liquidity risk, and reinvestment risk. These results provided support for the hypotheses and shown a relationship between total return and different type of risks. Since sukuk markets are becoming famous in globally developed countries which try to adopt Islamic sukuk for prevailing financial crisis, this study has many implications for the managerial and policy making level.

Keywords: Market, Performance, Return, Risk, sukuk structure

Article Review Status: Published

Pages: 145-161 (Download PDF)

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