Does sectorial cause the level of impact of risk on sukuk return? Empirical evidence from Nasdaq Dubai sukuk index

This study attempted to determine the impact of risks on returns of sukuk in different sectorial structures. The different types of risks (market risk, credit risk, operational risk and liquidity risk) are independant variables and the return of sukuk is dependant variable. Data were collected from Nasdaq Dubai HSBC sukuk index of sukuk market period from 2005 to 2015 on a monthly basis and analyzed using descriptive, correlation analysis and multi-regressions analysis.

The four regression models explain 70% to 89 % of the variation.While risk exposure on global sukuk return is 88%, risk exposure on sovereign sukuk return is 70%. While risk exposure to corporate sukuk return is 89% risk exposure to financial sukuk return is 73%. The results indicate that a sovereign sukuk return is very less exposed to risk compared with other sectors corporate sukuk and financial sukuk. Therefore, it is possible to conclude that sovereign sukuk return is minimally exposed to risk. It is also found that when compared with finance sector risk is high in the corporate sector.

This study recommend to maintain inflation rate at an optimal level and promote secondary markets for sukuk.