Several authors have conducted studies aimed at assessing the performance of Islamic and conventional stocks, leading to diverse outcomes. For instance, Narayan and Bannigidadmath (2015), Aloui et al. (2018), Milly and Sultan (2012), Abdullah et al. (2007), Azad et al. (2018), and Ebrahim et al. (2016) have put forth arguments suggesting that Islamic stocks have shown better performance than their conventional counterparts during various timeframes. Additionally, researchers have explored the concept of decoupling and co-movements between Islamic and financial indices. As an example, Hkiri et al. (2017) examined the hypothesis of decoupling Islamic and conventional stock indices during different crisis periods experienced in diverse regions, including Asia, Russia, Argentina, Brazil, and the United States. Their findings demonstrate the existence of a contagion effect, indicating that Islamic indices tend to decouple from their conventional counterparts during periods of financial turmoil. On the other hand, some studies argue that Islamic equity funds do not underperform in comparison to that of their conventional counterparts (Kraeussl and Hayat 2011), while Albaity and Ahmad (2008) argue that Islamic equity indices have no significant edge in return over conventional ones.

Some studies argue that because of crises, the volatility in the market increases, and there exist chances for integration and decoupling between Islamic and conventional stock indices. But there are different views on this. In 2016, Majdoub et al. found strong cointegration between Islamic and conventional stock markets in France, Indonesia, the UK, and the US but not in the UK. They also observed significant correlations in developed countries. In 2018, Cevik and Bugan revealed a nonlinear relationship between these markets, with conventional markets impacting Islamic ones during bear and bull market periods. In summary, Majdoub et al. (2016) identified long-term relationships in specific countries, while Cevik and Bugan (2018) emphasized the nonlinear and market-dependent nature of the Islamic–conventional stock market relationship. However, the study found that conventional stock markets affect Islamic stock markets during bearish and bullish market. Jebran et al. (2017) and Majdoub et al. (2016) argued that the two markets (conventional and Islamic) are co-integrated, and that Islamic indices receive spillover effects from conventional indices. More recent studies, on the other hand, including by Abu-Alkheil et al. (2017), Hkiri et al. (2017), and Saadaoui et al. (2017), found evidence of the decoupling of Islamic stocks from their conventional counterparts, especially during periods of market instability. Hoque et al. (2016), on the other hand, argue that as the Islamic index is a part or subset of the main index, therefore, the news, which has a positive or negative impact on the market, will have the same impact on both Islamic and conventional indices.

Several recent studies have used the wavelet coherence approach, which is novel in the field of economics. For example, Dewandaru et al. (2014) identified multiscale relationships between Islamic and conventional stock markets, which intensify during crises. Rivzi et al. (2015), using the same approach, found evidence of a fundamental contagion effect in Asia and a pure contagion effect between Asia and the US in early 2000.

The recent literature delves into how the COVID-19 pandemic impacts both Islamic and conventional stock indices. Baker et al. (2020) assert that its effect surpasses that of previous outbreaks like the Spanish flu. However, there are conflicting findings. For instance, Sharif et al. (2020) discover a potent impact when combined with oil volatility shocks. Yan et al. (2020) investigate various industries’ responses to the outbreak, observing short-term panic selloffs but anticipating long-term market corrections. Liu et al. (2020) contend that the Asian stock market swiftly reacted to the pandemic, with a partial recovery in the later stage of the outbreak. Sansa (2020) focuses on the impact of COVID-19 on Chinese and US markets during March 2020, revealing a significant positive association between confirmed COVID-19 cases and both countries’ markets. Furthermore, Ngwakwe (2020) examines the COVID-19 impact on Chinese, European, and US markets using a paired t-test of mean stock prices during the pandemic period (−50, +50 days). The results indicated an increase in mean stock values for the Chinese stock index, surpassing normal levels. In contrast, the Dow Jones Industrial experienced a significant decrease during the pandemic period. However, no differences in mean stock values before and during the pandemic were observed for the S&P 500 and Euronext 100 indices.

Overall, the recent literature highlights the complex and multifaceted influence of the COVID-19 pandemic on global stock markets, with varying short-term and long-term effects observed across different regions and industries.

Yarovaya et al. (2021) studied the resilience property of Islamic equity funds during the COVID-19 pandemic. The study found that Islamic funds outperformed their conventional counterparts during the peak months of the COVID-19 pandemic and, thus, proved to be more resilient to COVID-19 shocks. While analyzing the relationship between COVID-19 and stock prices, Ramelli and Wagner (2020) suggest that high levels of corporate debt and liquidity problems are the main drivers of volatility in the stock market. Islamic stocks have lower leverage because of Shariah screening requirements, they are still expected to be more immune to market risks during turbulent periods compared to their conventional counterparts. Interestingly, Pagano et al. (2020) found that more resilient companies greatly outperformed less resilient companies. They define pandemic resilience as robust social distancing that relies on technologies and/or organizational structures. The cumulative return for resilient firms’ differential from 2014 to 2019 was of the same magnitude as during the pandemic. Hasan et al. (2021) examined the performance of the Dow Jones and FTSE indices (conventional and Islamic) during the first 10 months of COVID-19 and found there was high co-movement and decoupling between the two types of indices, and they also claim that Islamic stocks did not provide any shelter to investors against risk during the financial crisis. Saleem et al. (2023) examined the hedging risk characteristics of gold and Sharia complaints during the COVID-19 pandemic and found that gold and Sharia-compliant stocks can hedge risk during periods of market recession.

Yarovaya et al. (2021) studied Islamic equity funds’ resilience during the COVID-19 pandemic and found that they outperformed conventional funds during the peak months, indicating greater resilience. Ramelli and Wagner (2020) attributed stock market volatility during the pandemic to high corporate debt and liquidity issues. Islamic stocks, with lower leverage due to Shariah requirements, were found to be more immune to market risks during turbulent times. Pagano et al. (2020) discovered that companies demonstrating pandemic resilience also performed better overall. Resilience was defined as implementing robust social distancing measures using technology and organizational structures. The cumulative return for resilient firms in the years leading up to the pandemic was comparable to their performance during the pandemic. Hasan et al. (2021) analyzed the performance of the Dow Jones and FTSE indices (both conventional and Islamic) during the first 10 months of the pandemic. They found a high degree of co-movement and decoupling between the two types of indices. However, they argued that Islamic stocks did not provide significant protection to investors during the financial crisis. Saleem et al. (2023) investigated the hedging risk characteristics of gold and Sharia-compliant stocks during the pandemic and found evidence that both could effectively hedge risk during market recession. Hasan et al. (2023) examined the different asset classes during crisis periods and found that gold and Islamic stock can better hedge various uncertainty factors than Bitcoin and crude oil, depending on the market conditions.