The sukuk–clean energy nexus under blockchain-market conditions: a Markov-switching approach to equity valuation

Purpose – This paper aims to examine whether the association between sukuk market performance and cleanenergy (CleanE) equity market performance varies acrosslatent marketstates and under different digital-market
conditions.
Design/methodology/approach – Using weekly data fromJanuary 2010 to December 2023, the study estimates
two-state Markov-Switching Dynamic Regression models linking the Dow Jones Sukuk Index, the Clean Edge
Energy total return index, a blockchain-market (BM) proxy based on global cryptocurrency market
capitalisation and atmospheric CO2 density. A second specification uses BM-conditioned sukuk terms to
compare the sukuk–CleanE association under relatively lower and higher blockchain-market conditions.
Findings – The findings indicate that the sukuk and BM proxies have a positive effect on clean energy equity
performance across both latent states. The sukuk coefficient is larger in the higher-volatility state, and the BMconditioned specification suggests a strongersukuk–CleanE association when blockchain-market conditions are
higher. These findings suggest that the level of digital financial market conditions may enhance the pricing
relevance of sukuk for clean energy assets. The results imply time-varying portfolio correlation, which a linear
model might miss. Given the nature of the study and the dependent variable, this study should inform riskvaluation monitoring rather than clean-energy investment projects.
Originality/value – This study contributes by integrating Islamic finance and digital-market conditions in a
regime-switching framework. It examines how the sukuk–clean-energy relationship varies across latent states
and under different blockchain-market conditions. The results are therefore relevant to market valuation, risk
pricing and future research on digital Islamic finance