The asymmetric multifractal efficiency of the sukuk market: a comparison with green and conventional bonds

Purpose The sukuk market has exhibited significant promise in recent years. In this context, academic literature on sukuk has proliferated. Still, limited attention has been devoted to understanding the efficiency behavior of the sukuk market. Motivated by this research gap, this study aims to examine the comparative efficiency of the sukuk market compared to its conventional counterparts such as conventional and green bonds. Design/methodology/approach This study investigates the multifractal scaling behavior of the sukuk and other major bond markets under different market conditions. To achieve this, this study uses well-established asymmetric multifractal detrended fluctuation analysis. Findings The findings of this study confirm that asymmetric multifractality (exhibiting price inefficiencies) prevails in the sukuk and other bond markets. The findings suggest that asymmetric multifractality in fixed-income markets is influenced by the investment time horizon and market conditions. Furthermore, the findings emphasize that inefficiencies in fixed-income markets become intensified during periods of economic and financial turmoil, such as the recent COVID-19 pandemic. Notably, the evidence highlights the superior efficiency of the sukuk market compared to conventional and green bonds. Practical implications The results suggest that the distinctive efficiency pattern of the sukuk market offers investors and portfolio managers with diversification and hedging opportunities to shield against downturns in other fixed-income markets. In addition, the evidence further reinforces that market participants can use Islamic bonds as safe-haven assets against conventional bonds during periods of crisis. Originality/value To the best of the authors’ knowledge, this study is a first attempt to investigate the efficiency dynamics of the sukuk market in comparison to its conventional counterparts.