The Impact of Cryptocurrency Volatility Dynamics on the Islamic Equity Market: The Case of Emerging Asia

Abstract

This paper investigates the impact of the realized volatility of positive and negative intraday Bitcoin returns on the sensitivity of Shariah-compliant stocks’ orthogonalized returns. We identify the impact in different market states and find that Bitcoin’s upside volatility negatively affects the returns of Islamic equities. The paper contributes to uncovering the properties of a niche Islamic Emerging Asian equity market. The findings offer important implications for investors’ diversification strategies.