Financial Innovation (Mar 2022)

Did green debt instruments aid diversification during the COVID-19 pandemic?

  • Paresh Kumar Narayan,
  • Syed Aun R. Rizvi,
  • Ali Sakti

DOI
https://doi.org/10.1186/s40854-021-00331-4
Journal volume & issue
Vol. 8, no. 1
pp. 1 – 15

Abstract

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Abstract Faced with a persistent pandemic, investors are concerned about portfolio diversification. While the literature on COVID-19 has evolved impressively, limited work remains on diversification opportunities. We contribute to the literature by exploring the volatility and co-movement of different sovereign debt instruments, including green sukuk, sukuk, bond and Islamic and conventional equity indices for Indonesia. Our results consistently point towards increased asset co-movement and weak profitability during the pandemic. Interestingly, sukuk and green sukuk have a 14% correlation with stocks, suggesting potential diversification prospects in times of extreme shocks.

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