Dynamic Dependency between the Shariah and Traditional Stock Markets: Diversification Opportunities during the COVID-19 and Global Financial Crisis (GFC) Periods

The aim of the present research is to highlight whether there exist any diversification opportunities from investing in developed and developing countries’ Shariah-compliant non-Shariah-compliant stock markets during global financial crisis (GFC) COVID-19 pandemic periods. For this purpose, we employ daily data for both Shariah non-Shariah indices 29 October 2007 31 December 2021. study uses multivariate GARCH-DCC wavelet approaches examine if selected markets. Evidence shows that although markets’ returns experience high volatility a similar degree, conventional Malaysia have highest among them. This less exposure risk higher possibilities compared their counterparts. Regarding markets, Japanese index U.S. are more volatile other market. Moreover, results power spectrum show significant rather than GFC. Similarly, Chinese market experienced minimum variance GFC period. On hand, wavelet-coherence transform indicate Shariah-based offered better portfolio traders Hence, investment basically close zero. Therefore, investors should carefully choose which stocks they can include portfolio.