Is there a systemic risk between Sharia, Sukuk, and GCC stock markets? A ΔCoVaR risk metric-based copula approach

This study examines the dependence structure and systemic risk concerning Sukuk, Sharia, and the Gulf Cooperation Council (GCC) stock markets. We first use copula functions to investigate the dependence structure between these markets, and subsequently, apply the conditional value-at-risk (CoVaR) and delta CoVaR (∆CoVaR) to assess the systemic risk. Results show evidence of time-varying symmetric tail dependence between Islamic stock markets and GCC stock markets, except for Saudi Arabia in which an average tail dependence is observed. Sukuk has symmetric tail dependence with Bahrain, Oman, and Abu Dhabi; average dependence with Qatar and Saudi Arabia; and asymmetric tail dependence with Dubai and Kuwait. Importantly, no evidence of systemic risk for Islamic (DJIM and Sukuk) and Gulf stock markets was found.