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

Paresh Kumar Narayan; Syed Aun R Rizvi; Ali Sakti

doi:10.1186/s40854-021-00331-4

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

Financ Innov. 2022;8(1):21. doi: 10.1186/s40854-021-00331-4. Epub 2022 Mar 3.

Authors

Paresh Kumar Narayan¹, Syed Aun R Rizvi², Ali Sakti³

Affiliations

¹ Monash University, Melbourne, Australia.
² Lahore University of Management Sciences, Lahore, Pakistan.
³ Bank Indonesia, Jakarta, Indonesia.

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.

Keywords: COVID-19; Green Sukuk; Indonesia Capital market.