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Journal of Management Sciences - Volume 4, Issue 1 2017
By Jamshed Y. Uppal, Inayat Ullah Mangla
10.20547/jms.2014.1704106
Keywords: Islamic finance, sukuk, Islamic bonds.
The study addresses the question ``How do the financial markets perceive and price internationally issued Islamic bonds?'' It is examined by empirically testing for the evidence of co-integration of sukuk yields with the US Treasury yields using Vector Error Correction (VEC) models. Our results indicate that the sukuk yields are highly co-integrated with the US Treasury yields in long-term relationships. The short-term dynamics of the sukuk yields with the interest rate series is, however, complex showing bi-directional influences. We infer that the international financial markets are viewing and pricing sukuk in a manner similar to that for the conventional bonds.