Sukuk rating prediction using voting ensemble strategy

Abstract

Islamic finance development has grown into a focal point in many countries accros the globe. Sukuk, in particular, an Islamic investment product that has received growing attention from sovereigns, multinational and national organizations from both developed and emerging economies. Its uses has been aimed to finance investments in a varieties of economic activities and development projects. Despite the promising look of Sukuk, currently there is lack of studies had been to examine and predict the rating of the Sukuk. As a result, many practitioners adopted the conventional bond hence ignore the fact that these two instruments are different in nature. In order to fill the gap in the literature, it is the aim of this research to develop an ensemble model that can be used to predict Sukuk rating. The effectiveness of the proposed models were evaluated using dataset on Sukuk issuance for domestic from 2006 to 2016. The results indicate that the overall performance of the ensemble model is fall short behind the induction decision tree (IDT) model. However, the class precision of the ensemble model improved, particularly in predicting the lowest rating of Sukuk.