Unveiling the quantile connectedness between cryptocurrency market and Shari’ah-based sustainability indices

Purpose This study aims to examine the quantile connectedness of Islamic cryptocurrencies compared to conventional cryptocurrencies with Shari’ah-based sustainability indices. Design/methodology/approach For baseline results, the authors use a novel econometric method, the method of moments quantile regression (MMQR), to estimate coefficients across heterogeneous quantiles under bearish and bullish market trends. The main empirical investigation uses daily data of two Islamic cryptocurrencies, two conventional cryptocurrencies and two Shari’ah-based sustainability indices from January 3, 2022, to September 30, 2024. For robustness tests, the authors extend the sample to five Islamic cryptocurrencies and the top five conventional and green cryptocurrencies, ranked by market capitalization, alongside four Shari’ah-based sustainability indices. The quantile VAR (QVAR) connectedness approach is used as an alternative method to validate the main findings. Findings Islamic cryptocurrencies show stronger quantile connectedness with Shari’ah-based sustainability indices compared to conventional cryptocurrencies. Positive connectedness dominates in bullish markets, supporting growth-oriented strategies, while negative connectedness emerges in bearish markets, indicating potential for portfolio diversification and hedging. Practical implications Overall, this study findings are significant for both diversification-seeking investors, who may prefer negative connectedness, and growth-oriented investors, who may benefit more from positive connectedness driven by market integration. Originality/value This study investigates the quantile connectedness of Islamic cryptocurrencies with Shari’ah-based sustainability indices, including a robustness check with an extended crypto sample and an alternative QVAR connectedness methodology.