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This study analyzes the inflation hedging of Islamic and conventional equities by employing 26 indices for the period ranging from January 1996 till August 2018. The authors investigate the decoupling hypothesis for Islamic versus conventional equities across various investment horizons.

The authors employ a vector autoregressive framework coupled with bootstrapping procedure to compute inflation hedging measures. The hedging measures employed account for the inflation hedging capacity in terms of hedging effectiveness as well as the cost of hedging (efficiency). The authors account for various investment horizons ranging from one month to ten years.

Although, the authors do not find consistent evidence for the decoupling hypothesis of Islamic and conventional equities in terms of their inflation hedging capacity. However, the authors document that certain Islamic equity indices can be employed to effectively hedge against the risk of inflation.

The main contribution of this study is that the existing literature on the comparative performance of Islamic versus conventional equities against inflation risk is sparse. The purpose of this study is to analyze the inflation hedging attributes of Islamic versus conventional equities, that is, whether Islamic equities render better real returns than their conventional counterparts. It will contribute to the growing literature on the comparison between Islamic and conventional equities by documenting the real return attributes of these two, apparently different, assets. A further contribution is that in order to account for the different investment horizons for different types of investors, this study will quantify the real return attributes of Islamic and conventional equities for short-, medium- and long-term investors.

This conceptual paper aims to explore portfolio replication to resolve post-COVID pandemic private and public debt. This paper stresses the need to be less dependent on a debt-based system and the emergence Islamic equity market.

This study analyses different types of risks involved in Islamic and conventional portfolios by using risk measures such as relative beta and comparatively examining the systematic and downside risk exposure of Islamic and conventional portfolios. Data was collected monthly from 2016 to 2022.

The findings indicate that the replications of a conventional portfolio into an Islamic portfolio are compatible with the regulatory standard, sharia boundaries and professional practices developed from investment theory. The result shows that Islamic portfolios have lower risk exposure compared with their conventional counterparts in most of the sample years, therefore, become further attractive for debt–equity portfolio swaps and Sharia-compliant investors preferring low-risk preferences. The result confirmed that the Islamic portfolios have a higher return and less risk than conventional portfolios.

The implications of this research are to provide a road map to the regulators, policymakers, governments and the financial industry on how to rearrange some of the public and private debt. A likely remedy is incorporating Islamic financial instrument principles through the equitisation of public and private debt.

This research contributes to investors (particularly those who want to avoid riba [usury] based investment) to make more diversified portfolios by considering Islamic portfolios to reduce risk exposure.

To the best of the authors’ knowledge, this is the first paper to create bivariate debt–equity portfolios swaps composed of Islamic and conventional assets.

The purpose of this paper is to quantify the extent to which the Malaysia-based equity investors can benefit from diversifying their portfolio into the conventional and Islamic Southeast Asian region and the world’s top ten largest equity indices (China, Japan, Hong Kong, India, the UK, the USA, Canada, France, Germany and Switzerland).

The multivariate GARCH-dynamic conditional correlation is deployed to estimate the time-varying linkages of the selected conventional and Islamic Asian and international stock index returns with the Malaysian stock index returns, covering approximately eight years daily starting from 29 June 2007 to 30 June 2016.

In general, in terms of volatility, the results indicate that both Asian and international Islamic stock indices are more or less volatile than its conventional counterparts. From the correlation analysis, we can see that both the conventional and Islamic MSCI indices of Japan provide more diversification benefits compared to Southeast Asian region, China, Hong Kong and India. Meanwhile, in terms of international portfolio diversification, the results tend to suggest that both the conventional and Islamic MSCI indices of the USA provide more diversification benefits compared to the UK, Canada, France, Germany and Switzerland.

The findings of this paper may have several significant implications for the Malaysia-based equity investors and fund managers who seek for the understanding of return correlations between the Malaysian stock index and the world’s largest stock market indices in order to gain higher risk-adjusted returns through portfolio diversification. With regard to policy implications, the findings on market shocks and the extent of the interdependence of the Malaysian market with cross-border markets may provide some useful insights in formulating effective macroeconomic stabilization policies in the efforts of preventing contagion effect from deteriorating the domestic economy.

This study aims to comparatively analyze the performance of Islamic and conventional income and equity funds using various performance evaluation methods.

The authors comparatively analyze the performance of mutual funds using measures, such as tracking error, Sharpe ratio (1966), Treynor ratio (1965), M-square measure by Modigliani and Modigliani (1997) and information ratio. The authors also use market timing and selection measures, such as Treynor and Mazuy model (1966), Henriksson and Merton (1981) model and Fama’s decomposition approach (1973).

The authors find that Islamic equity funds are as much competitive as conventional equity funds. All Islamic equity funds have positive Sharpe ratio, Treynor ratio and net selectivity measure. Islamic equity funds are slightly less risky in general. Islamic equity and income funds generally have positive Jensen's Alpha and a positive market timing ability. However, the authors find that Islamic income funds generally underperform the market due to less Shari’ah-compliant investment class assets in the market.

It will help the industry players to assess their strategic positioning with regard to the commercial competitiveness of Islamic investments.

The authors take considerably large sample of 60 funds in Pakistan as compared to previous studies and also cover recent period (2006-16). For income funds, the authors construct an original benchmark index based on price and dividend data and use that in performance assessment.

The purpose of this paper is to examine the international diversification benefits of Islamic bonds (Sukuk) for equity investors in conventional stock markets. The authors compare the diversification benefits of these securities with their conventional alternatives from advanced and emerging markets. Compared to conventional bonds, Sukuk are backed by tangible assets and carry both bond and stock-like features. Furthermore, the Sharia-based limitations limit the risk in these securities as a result of ethical investing rules. The regime-based model provides insight to possible segmentation (or integration) of these securities from global markets during different market states.

Risk spillover effects across conventional and Islamic stock and bond markets are examined using a Markov regime-switching GARCH model with dynamic conditional correlations (MS-DCC-GARCH). Weekly return series for conventional (advanced and emerging) and Islamic stock and bond indices are examined within a regime-dependent specification that takes into account low, high, and extreme volatility states. The DCC are then used to establish alternative diversified portfolios formed by supplementing conventional and Islamic equities with conventional and Islamic bonds one at a time.

Asymmetric shocks are observed from conventional stocks and bonds into Islamic bonds (Sukuk). Compared to emerging market bonds, Sukuk are found to display a different pattern in the transmission of global market shocks. The analysis of dynamic correlations suggests a low degree of association between Islamic bonds and global stock markets with episodes of negative correlations observed, particularly during market crisis periods. Portfolio performance analysis suggests that Islamic bonds provide valuable diversification benefits that are not possible to obtain from conventional bonds.

This study provides comprehensive analysis of volatility interactions and dynamic correlations across Islamic and conventional markets within a regime-based framework and provides insight to whether these securities could serve as safe havens or diversifiers for global investors. The findings have significant implications for global diversification strategies, particularly during market crisis periods.

This paper evaluates the performance of actively managed conventional and Islamic equity funds in a developing economy with a focus to assess the performance-growth puzzle posited by Gruber (1993) (a.k.a Gruber’s puzzle). Under the context of an emerging market of Pakistan, this study explores if actively managed equity fund (AMEF) managers have been able to add value by outperforming the market in terms of stock-selection and market-timing abilities; and the comparative performance analysis of Islamic versus conventional AMEFs is also carried out.

We employ Sharpe and Treynor ratios, Capital asset pricing model, Fama–French three factors model (1993), Carhart four-factor model (1997) and Hendrickson (1981) market timing models on 45 equity funds comprising of 23 conventional and 22 Islamic equity funds operating in Pakistan for a period of 10 years. The overall sample period (2008–2018) is divided into two 5 years sub-periods (i.e. 2009–2013 and 2014–2018) and three 3 years sub-periods (2009–2011, 2012–2014 and 2015–2017) to be viewed in conjunction with the country's macro-economic condition.

We report that the actively managed equity funds (AMEFs) were unable to beat the market index with their stock selection or market timing capabilities. However, AMEFs depicted improved performance in the post-global financial crisis period where both conventional and Islamic AMEFs generated substantial rewards for the given amount of risk. Also, conventional AMEFs outperformed Islamic AMEFs potentially due to their holdings in highly leveraged value and large-cap stocks, while Islamic AMEFS invest more cautiously in small-cap and value firms. Analysis of market timing skills revealed that the funds have not been able to select the undervalued stocks and adopted a defensive strategy in the post-global financial crisis recovery period.

Our findings shed some interesting insights and raise some pertinent questions for research, policy, and practice – specifically for developing countries’ context. The no ‘return-growth’ configuration defies its fit with the ‘Gruber puzzle’ and somewhat presents a case of what we call the ‘Inverse Grubber puzzle’. This novel notion of the ‘Inverse Grubber puzzle’ should inform policy and practice to reflect on their practices, institutional arrangement, regulatory framework and policy design in developing economies characterized by lacklustre performance and growth of AMEFs. For example, the regulatory design may consider focusing on stimulating financial inclusion and deepening by motivating low-cost Index tracker funds (ITFs) – with lower fund management costs, while allocating the avoided cost to flow towards effective marketing campaigns driving greater awareness, financial deepening, and investor base diversification. For future research, financial development researchers may explore the implications and appropriateness of AMEFs versus ITFs in other developing economies.

The work reported in this paper is original and constitutes a valuable asset for ethno-religious-sensitive investors. The research has not been published in any capacity and is not under consideration for publication elsewhere.

The purpose of this paper is to investigate the extent to which Chinese equity investors can benefit from diversifying their portfolio into Shariah-compliant (Islamic) indices. It examines three Islamic stock indices (FTSE Shariah China price index, MSCI China Islamic IMI price index and the DJ Islamic Greater China price index) and ten sectoral indices in Shanghai Stock Exchange as a sample.

The multivariate GARCH dynamic conditional correlations (MGARCH-DCC) is deployed to estimate the time-varying linkages of returns of the selected indices, covering approximately eight years daily data starting from 28 August 2009 to 29 September 2017.

In general, in terms of volatility, the results indicate that all Islamic Indices are less volatile than the conventional indices. From the correlation analysis, the results imply that Chinese conventional equity investors would benefit from Islamic stock indices, especially when they include DJ Islamic Greater China in their portfolio.

The findings of this paper may have several significant implications for the Chinese equity investors and fund managers for better understanding about co-movements of the Chinese conventional sectoral indices with the Shariah-compliant stock indices with the purpose of gaining higher risk-adjusted returns through portfolio diversification.

This study aims to examine the performance of environmental, social and governance (ESG) equity indices in Latin America (LA), evaluating their risk-return characteristics in comparison to conventional benchmark indices.

Using a quantitative empirical approach, the authors analyze ESG equity indices from Brazil, Mexico, Chile, Peru and Colombia, employing metrics such as Sharpe, Sortino and Omega ratios to measure risk-adjusted returns. Regression analysis is employed to assess the replicability of ESG indices by benchmark indices. Monte Carlo simulations are conducted to explore the potential increase in risk-adjusted returns when ESG equity indices are incorporated into portfolios.

The study addresses critical questions for investors: Can ESG indices outperform their benchmarks? Can these ESG indices be replicated by benchmark counterparts? Do ESG equity indices enhance portfolio diversification? The findings reveal that investing in ESG indices has the potential to enhance risk-adjusted returns and portfolio diversification.

While this study focuses on various LA economies, it’s important to note variations in currency and volatility.

For investors in LA, this study highlights the importance of considering ESG indices as part of their investment strategies. While not all ESG indices outperform conventional ones, some may improve diversification and risk-adjusted performance. Investors should carefully assess market-specific conditions and national factors when making investment decisions.

The primary contribution of this study is its focus on LA countries in the examination of diverse portfolios. The research provides valuable insights into the performance of ESG indices in this region compared to conventional benchmark indices. This approach addresses an important gap in the existing literature and offers a more comprehensive perspective on ESG investing and portfolio diversification.

Se examina el rendimiento de los índices-ESG en América Latina (AL), evaluando sus características de riesgo y retorno en comparación con los índices convencionales.

Utilizando un enfoque cuantitativo, analizamos los índices-ESG de Brasil, México, Chile, Perú y Colombia, empleando ratios de Sharpe, Sortino y Omega para medir los rendimientos ajustados al riesgo. Se utiliza análisis de regresión para evaluar la replicabilidad de los índices-ESG por parte de los índices de referencia. Se realizan simulaciones de Monte-Carlo para explorar el aumento en los rendimientos ajustados al riesgo cuando se incorporan los índices-ESG en las carteras.

El estudio aborda preguntas críticas: ¿Pueden los índices-ESG superar a sus índices de referencia? ¿Pueden estos índices-ESG ser replicados por sus contrapartes de referencia? ¿Mejoran los índices-ESG la diversificación de las carteras? Los hallazgos revelan que la inversión en índices-ESG tiene el potential de mejorar los rendimientos y la diversificación de las carteras de inversión.

Aunque este estudio se centra en diversas economías de AL, es importante tener en cuenta variaciones en moneda y volatilidad.

La principal contribución de este estudio radica en su enfoque en países de AL en el examen de carteras diversas; ofrece valiosos conocimientos sobre el rendimiento de los índices-ESG en esta región en comparación con los índices convencionales.

This study comprehensively aims to review the key influential and intellectual aspects of spillovers between Islamic and conventional financial markets.

The study uses the bibliometric and content analysis methods using the VOSviewer software to analyse 52 academic documents derived from the Web of Sciences (WoS) between 2015 and June 2022.

The results demonstrate the influential aspects of spillovers between Islamic and conventional financial markets, including the leading authors, journals, countries and institutions and the intellectual aspects of literature. These aspects are synthesised into four main streams: research between stock indexes; studies between stock indexes, oil and precious metal; works between Sukuk, bond and indexes; and empirical studies review. The authors also propose future research directions in spillovers between Islamic and conventional financial markets.

Our study is subject to several limitations. Firstly, the authors only used the WoS database. Secondly, the study only includes papers and reviews written in English from the WoS. This study assists academic scholars, practitioners and regulatory bodies in further exploring the suggested issues in future studies and improving and predicting economic and financial stability.

To the best of the authors’ knowledge, no extant empirical studies have been conducted in this area of research interest.

This study investigates information flow of market constituents and global indices at multi-frequencies.

The study’s findings were obtained using the Improved Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (I-CEEMDAN)-based cluster analysis executed for Rényi effective transfer entropy (RETE).

The authors find that significant negative information flows among sustainability equities (SEs) and conventional equities (CEs) at most multi-frequencies, which exacerbates diversification benefits. The information flows are mostly bi-directional, highlighting the importance of stock markets' constituents and their global indices in portfolio construction.

The authors advocate that both SE and CE markets are mostly heterogeneous, revealing some levels of markets inefficiencies.

The empirical literature on CEs is replete with several dynamics, revealing their returns behaviour for diversification purposes, leaving very little to know about the returns behaviour of SE. Wherein, an avalanche of several initiatives on Corporate Social Responsibility (CSR) enjoin firms to operate socially responsible, but investors need to have a clear reason to remain sustainable into the foreseeable future period. Accordingly, the humble desire of investors is the formation of a well-diversified portfolio and would highly demand stocks to the extent that they form a reliable portfolio, especially, amid SEs and/or CEs.

本研究擬審查多頻率的及為市場成份的信息流和全球指數。

研究人員使用基於改良完全集合經驗模態分解自適應噪聲(Improved Complete Ensemble Empirical Mode Decomposition with Adaptive Noise)的聚類分析法,取得Rényi有效轉移熵,藉此得到研究結果。

我們發現、於大部份多頻率,在持續性股票和傳統股票間有顯著的負信息流動,這會增加多樣化的益處。這些信息流大部份是雙向的,這強調了股票市場成份及其全球指數在構建投資組合上的重要性。

我們認為持續性股票市場和傳統股票市場大多為異質市場,這顯示了市場的低效率,而且這低效率的程度頗大。

關於傳統股票的實證性文獻裡是充滿了變革動力的,這顯示了它們以多樣化為目的的回報行為。這使我們對關於持續性股票的回報行為、認識變得實在太少了。於此,大量的企業社會責任的新措施不斷提醒各公司、要本著企業社會責任的理念去營運;但投資者需清晰明白他們為何需在可見的將來保持可持續性。因此,他們卑微的願望是一個較好的多樣化投資組合得以形成,故此他們高度要求股票要有組成可靠投資組合的性質和能力,特別是在持續性股票和/或傳統股票當中。