The sukuk–clean energy nexus under blockchain-market conditions: a Markov-switching approach to equity valuation

Purpose This paper aims to examine whether the association between sukuk market performance and clean-energy (CleanE) equity market performance varies across latent market states and under different digital-market conditions. Design/methodology/approach Using weekly data from January 2010 to December 2023, the study estimates two-state Markov-Switching Dynamic Regression models linking the Dow Jones Sukuk Index, the Clean Edge Energy total return index, a blockchain-market (BM) proxy based on global cryptocurrency market capitalisation and atmospheric CO2 density. A second specification uses BM-conditioned sukuk terms to compare the sukuk–CleanE association under relatively lower and higher blockchain-market conditions. Findings The findings indicate that the sukuk and BM proxies have a positive effect on clean energy equity performance across both latent states. The sukuk coefficient is larger in the higher-volatility state, and the BM-conditioned specification suggests a stronger sukuk–CleanE association when blockchain-market conditions are higher. These findings suggest that the level of digital financial market conditions may enhance the pricing relevance of sukuk for clean energy assets. The results imply time-varying portfolio correlation, which a linear model might miss. Given the nature of the study and the dependent variable, this study should inform risk-valuation monitoring rather than clean-energy investment projects. Originality/value This study contributes by integrating Islamic finance and digital-market conditions in a regime-switching framework. It examines how the sukuk–clean-energy relationship varies across latent states and under different blockchain-market conditions. The results are therefore relevant to market valuation, risk pricing and future research on digital Islamic finance.