Do Asian Islamic Equities Offer Diversification Benefits in Cryptocurrency Portfolio in Times of Increased Uncertainty?

Abstract

This study explores whether Islamic equities offer portfolio diversification benefits to cryptocurrency investors. It employs the Continuous Wavelet Transform model to examine the nature of coherence between major cryptocurrency asset classes and major Asian Islamic equity markets on different investment horizons. We consider a range of Islamic equity indices for multiple countries and a basket of three prominent cryptocurrencies: Bitcoin, Ethereum and Ripple. Findings suggest that Asian Islamic equities offer portfolio diversification opportunities. Our findings also imply that Asian Islamic equities are not efficient and are prone to short-term speculative activities.