Dynamic spillover effect among Islamic stock indices amidst global financial crises: evidence from QVAR network and frequency connectedness

Abstract This study explores the dynamic spillover effects and interconnectedness of some major Islamic stock indices during global financial crises, such as the COVID-19 pandemic and the Russia–Ukraine war. It adopts the Quantile Vector Autoregression (QVAR)-frequency connectedness approach to analyse short-term, medium-term, and long-term spillovers across bearish, normal, and bullish conditions. The findings reveal that developed Islamic markets such as the USA, World Index, Canada, and the UK are net shock transmitters, while emerging Islamic markets including Qatar, Indonesia, and Malaysia are net receivers. The results indicate that interconnectedness intensifies during global crises, implying that Islamic stocks lose some of their traditional safe-haven characteristics when systemic shocks spread rapidly across markets. This challenges the conventional narration that Shariah-compliant assets always provide protection during crises. In addition, by employing a portfolio optimization framework based on the Minimum Connectedness Portfolio (MCoP), the study demonstrates that systemic risk transmission can be significantly mitigated, thereby enhancing diversification efficiency among Islamic indices. These insights offer practical guidance for investors and policymakers seeking to reinforce portfolio resilience and strengthen risk management strategies amid series of financial turbulence.