Extreme dependence and risk spillovers between oil and Islamic stock markets Syed Jawad Hussain Shahzad a, ⁎, Walid Mensi b,c , Shawkat Hammoudeh a,d , Mobeen Ur Rehman e , Khamis H. Al-Yahyaee c a Energy and Sustainable Development (ESD), Montpellier Business School, Montpellier, France b Department of Finance and Accounting, University of Tunis El Manar, Tunis, Tunisia c Department of Economics and Finance, College of Economics and Political Science, Sultan Qaboos University, Muscat, Oman d Lebow College of Business, Drexel University, Philadelphia, United States e Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST), Islamabad, Pakistan article info abstract Article history: Received 10 March 2017 Received in revised form 18 August 2017 Accepted 14 October 2017 Available online xxxx This paper examines the downside and upside risk spillovers and dependence structure be- tween five Islamic stock markets (the Islamic Market World index, Islamic indices of USA, UK, Japan and the Islamic Financials sector index) which are of paramount importance for faith-oriented investors and particpants in the oil market. The results underscore the presence of time-varying lower tail dependence between the oil and Islamic stock markets. Furthermore, we provide supportive evidence of asymmetric down- and up-side risk spillovers from oil to the Islamic stock markets and vice versa. Finally, these asymmetric risk spillovers have signif- icantly increased after the global financial crisis. © 2017 Elsevier B.V. All rights reserved. JEL classification: C58 F37 G11 G14 Keywords: Oil prices Islamic stock markets Risk spillovers Copula Delta CoVaR 1. Introduction Oil plays an important role in fueling the economies of the world, irrespective of their development status. In this significant capacity, oil prices affect the global markets whether they follow conventional or faith-oriented business models. Oil should also command more importance in Islamic economies or financial markets because major oil-producing countries follow the Islamic faith, thereby sharing risk with and transferring it to each other particularly during economic downturns and periods of financial turmoil. The global financial crisis (GFC) of 2008–09, the European sovereign debt crisis of 2011–12 and the recent BREXIT of 2016 have re-ignited international investor's interest in risk spillovers among financial markets during stress and downturn pe- riods. Therefore, the intrinsic relationship between global oil prices and Islamic equity returns is important for international inves- tors, particularly those interested in faith-oriented investments. The spillover effect of extreme downward or upward oil price movements has important implications not only for the Islamic equity trading and risk management but also for hedging strate- gies used by international investors. Emerging Markets Review xxx (2017) xxx–xxx ⁎ Corresponding author. E-mail addresses: j.syed@montpellier-bs.com (S.J.H. Shahzad), walid.mensi@fsegt.rnu.tn (W. Mensi), shawkat.hammoudeh@gmail.com (S. Hammoudeh), Mobeenrehman@live.com (M.U. Rehman), yahyai@squ.edu.om (K.H. Al-Yahyaee). EMEMAR-00526; No of Pages 22 https://doi.org/10.1016/j.ememar.2017.10.003 1566-0141/© 2017 Elsevier B.V. All rights reserved. Contents lists available at ScienceDirect Emerging Markets Review journal homepage: www.elsevier.com/locate/emr Please cite this article as: Shahzad, S.J.H., et al., Extreme dependence and risk spillovers between oil and Islamic stock markets, Emerg. Mark. Rev. (2017), https://doi.org/10.1016/j.ememar.2017.10.003