Performance of sectoral Islamic indices during COVID-19

This study examines the impact of oil prices, world uncertainty and pandemic uncertainty on sectoral Islamic stocks (financial, healthcare, industrial, oil and gas, the technology sector, the telecommunications sector and the utility sector). This study employs quantile-on-quantile regression and wavelet-based Granger causality ranging from 1996Q1 to 2020Q4. The findings of the study confirm the overall negative effect of world oil prices, world uncertainty and the world pandemic uncertainty index on all the sectoral Islamic indices except the technology and telecommunication sectors. We find that world oil prices, world uncertainty and the world pandemic uncertainty index positively affect the technology and telecommunications sectors. However, the relationship between the proposed variables varies over the quantiles, depicting the heterogeneous response of financial markets due to various states of the economy. This study has policy implications related to sectoral Islamic indices; policies should be based on the sectoral performance of Islamic indices rather than the overall index because of the heterogeneous performance of various sectors.