Impact of the global financial crisis on Islamic and conventional stocks and bonds

This study explores the impact of the global financial crisis ( GFC ) on Islamic and conventional stock and bond indices in 11 Islamic and eight non‐Islamic countries. We find that there are benefits of Islamic stocks during the GFC , particularly during the early stage of the crisis because Islamic institutions are prohibited from holding sub‐prime mortgage securities and derivatives. The strongest benefits of Islamic stocks are in the UK and USA . We conclude that there are benefits of risk reduction and stability for Islamic stocks during a financial crisis, although not necessarily during a global recession.