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Muslim investors must comply with the ethical injunctions prescribed for them while making financial investments. As per Islamic principles, the use of Riba (interest), Maysir (gambling) and Gharar (uncertain or contingent payoff contracts) is prohibited. This chapter provides some recent post great financial crisis evidence on the comparative performance of Islamic and conventional market indices. Islamic indices outperformed conventional market indices in terms of annualized returns except for emerging markets. In the overall period of 2007-16, it is found that Islamic indices have a lower coefficient of variation and hence higher reward to variability ratio. This suggests that Islamic indices are superior to conventional market indices adjusting for variability in returns. In most comparable Islamic and conventional indices, a strong co-movement and long-term co-integrating relationship is found. The results also highlighted causality running from conventional indices to the Islamic indices in most of the market groups, except for the S&P Global.

This study aims to investigate the volatility of conventional and Islamic indices and to explore the impact of the global financial crisis toward the volatility of both markets in Malaysia.

The data consist of financial times stock exchange group (FTSE) Bursa Malaysia Kuala Lumpur Composite Index and FTSE Bursa Malaysia Hijrah-Shari‘ah Index covering the period January 2008-October 2014. Generalized autoregressive conditional heteroskedasticity is used to find the volatility of the two markets and an ordinary least square model is then used to investigate the impact of the crisis toward the volatility of those markets.

Interestingly, the result shows that Islamic index is less volatile during the crisis compared to the conventional index. Furthermore, the crisis is proven to significantly affect the volatility of conventional index in the short run and Islamic index in the long run.

This study explores the volatility–financial crisis nexus, especially for the Islamic financial markets, which to the best of the author’s knowledge, is still lacking empirical research which may improve the understanding upon this issue.

This paper aims to investigate the financial uncertainty vary according to different financial assets type: conventional and Islamic.

Common factors are related to risk or known information. For this, the authors use general dynamic factor model to extract common variation between both types of indexes. Then they calculate stochastic volatility for each idiosyncratic component. They also carry out the study on three different family indexes respectively, Dow Jones, S&P and MSCI indexes, for the period going from January 1, 2008 to June 30, 2018. Through a comparison analysis with uncertainty index designed for conventional assets, the authors examine the similarity between the two indexes via mean, median and variance tests. They decrypt the interrelation between them by using OLS linear regression, vector autoregressive model.

The findings show that Islamic assets uncertainty is different from conventional uncertainty level. This difference can be due to the Shariah screening and the prohibition of gharar. The main findings suggest that Islamic financial uncertainty is lower than conventional one. The OLS results prove that conventional financial uncertainties have no impact on their Islamic counterparts. In addition, Islamic financial uncertainty appears to have no significant influence on conventional one exception for Dow Jones pair. Overall, the findings support the decoupling hypothesis in term of uncertainty only for SP and MSCI indexes.

Risk averse investors can find their claim in Shariah-compliant assets, as it offers a low level of financial uncertainty. A portfolio manager may benefit from the long run non-association in uncertainty between Islamic and conventional assets especially in time of crisis.

In this work, the authors measured financial uncertainty differently and take into account the specific features of each index type to improve the results quality.

This study aims to empirically compare the performance of Islamic indices vis-à-vis to their conventional counterparts in India.

The performance of the Islamic and selected conventional indices is evaluated using various risk-adjusted performance measures such as Sharpe ratio, Treynor ratio, M-square (M²) ratio, information ratio, capital asset pricing model (CAPM), Fama-French three-factor model and Carhart four-factor model in India context. The period of study is from December 2006 to 2018.

The risk-adjusted performance measures based on the Sharpe ratio, Treynor ratio, information ratio, the M² ratio show that the return of Islamic indices provides slightly superior performance. However, performance investigated using CAPM, Fama-French and Carhart benchmarks produce a statistically insignificant differences in return of the Islamic and conventional benchmarks.

The Sharīʿah-compliant indices can provide a viable, ethical and alternative investment avenue for faith-based investors as it will not make them worse off in comparison to the conventional benchmarks. This also offers opportunity to conventional investors for portfolio diversification. The promotion of faith-based investment can serve as a tool for financial inclusion to attract a huge segment of Indian population in the formal financial system. The findings of the study suffer from the limitation of small sample size and empirical methods used.

This study contributes to the literature on the comparative performance of Islamic and conventional indices in general and emerging markets, in particular, using most recent data and covering a relatively long span of time. To the best of the knowledge, this is the first comprehensive study examining the performance of Islamic indices, using multiple Islamic indices and various risk-adjusted measures in the Indian context.

This paper aims to expand the literature on performance and volatility of Islamic funds and indices in comparison to their conventional unscreened counterparts, by studying the Moroccan case considering the recent introduction of Islamic finance in the country toward the end of 2015.

As there are still no Shariah-compliant indices in Morocco, the authors first applied four Shariah screening methodologies of some of the world leading equity index providers (i.e. Dow Jones, FTSE, S&P and MSCI) to screen the public listed companies in Casablanca Stock Exchange for Shariah compliance. Next, the authors constructed four Islamic float-weighted indexes for which they modeled the dynamic volatility using an extension of the AutoRegressive Conditional Heteroskedasticity models, namely, EGARCH(1,1).

The findings show that the screening process resulted in a well-diversified universe of Shariah-compliant stocks (25.6 per cent) to invest in. Furthermore, it is found that constructed Islamic indices outperformed the broad-based Moroccan All Shares Index (MASI) during the considered period of analysis (January 2013 to December 2014), and their long-run volatility is higher. This indicates that investors in Shariah-compliant stocks do not sacrifice financial performance for their risky investment. The estimates of the model show that volatility for the MASI is more persistent and takes longer time to die, and the leverage effect is positive for all indices, meaning that volatility of indexes’ returns is influenced more by good news than bad news, a result that is in contrast to other studies for developed countries.

On the arrival of the new banking law that introduced Islamic finance for the first time in Morocco, the authors suppose that these results could be very helpful for the Moroccan financial authorities in consideration with the construction of Islamic equity indices for Muslim investors seeking to invest ethically in accordance to their religious convictions but also for index funds managers and other equity market players.

The present study is the first of its kind in Morocco to construct Islamic indices using Shariah screening methodologies for which the volatility is modeled using an EGARCH(1,1) dynamic volatility model.

The aim of this study is to measure portfolio diversification benefits of the Turkey-based equity investors into top trading partner countries. Portfolio diversification benefits are analyzed from the viewpoint of two types of investors in Turkey: conventional equities investors and Islamic equity investors.

In order to evaluate the time-varying correlations of the trading partner country's stock index returns with the Turkish stock index returns, the multivariate-generalized autoregressive conditional heteroskedasticity–dynamic conditional correlation (GARCH-DCC) is applied based on daily data covering 13 years' period between January 22, 2008 and January 22, 2021.

The results revealed that the US stock indices provide the most diversified benefit for both conventional and Islamic Turkey-based equity investors. In general, Islamic indices exhibit relatively lower correlation with trading partners than conventional indices. Turkey and Russia are recorded as the most volatile indices.

The diversification potential in trading partners for Turkey-based Islamic equity investors has not been studied yet. This study is to fill in this gap in the literature and to give fruitful insights to both conventional and Islamic investors.

There is a great deal of research that has been done to investigate the investment characteristics of conventional socially responsible investment portfolios compared to their broader conventional counterparts. However, the impact of incorporating sustainability criteria into the traditional Sharia screening process has not so far been investigated. Therefore, the study aims to give empirical evidence as to whether or not incorporating sustainability socially responsible criteria in the traditional Sharia screening process has a significant impact on the investment characteristics of the Islamic investment portfolio.

The paper examines the investment characteristics of four groups of investment portfolios mainly, Dow Jones Global Index, Dow Jones Sustainability World Index, Dow Jones Islamic Market World Index and Dow Jones Islamic Market Sustainability Index. To improve the robustness of the study, the analysis was carried out at different levels. First, absolute mean return and t‐test were used to examine whether the difference between the different groups of investments is statistically significant or not. Second, risk adjusted equilibrium models, both single‐index and Fama and French multi‐index, were employed. This is to control for different risk exposure and investment style bias associated with different investment portfolios examined.

The paper finds that neither the Sharia nor the sustainability screening process seems to have an adverse impact on the performance and systematic risk of the investment portfolios compared to their unrestricted conventional counterparts. Therefore, Muslim as well as socially responsible investors can choose investments that are consistent with their value systems and beliefs without being forced to sacrifice performance or expose to higher systematic risk.

The study contributes to the existing literature by giving new evidence on the impact of incorporating sustainability criteria into the traditional Sharia screening process that has not so far been investigated.

The purpose of the study is to measure cross-country stock market correlation and volatility transmission during the global coronavirus disease 2019 (COVID-19) pandemic. The paper traces trajectory of Islamic equity investments in order to get insights on the behavior of the markets during the crisis.

The paper uses generalized method of moments (GMM), autoregressive distributed lag (ARDL) and multivariate GARCH (MGARCH) models for analysis of dynamic causality, stock market cointegration, correlation and volatility transmission between Islamic stock indices.

The result of normal correlation analysis on the share indices show the markets move together. The result of ARDL cointegration test shows the markets returns are cointegrated as a group. To further make sense of the data; the indices were grouped into four different categories, then cointegration tests were conducted. The results of the analysis show that the subgroups are cointegrated except the low COVID-19 subgroup. Based on MGARCH findings, the possibility of volatility transmission between markets during the crisis is high. The market returns indices show the usual herd mentality common during the period of crisis.

Unlike other works in this area, this paper attempt to trace the trajectory of Islamic equity investment in order to get relevant insights and arrives at appropriate ways of responding to the crisis.

The purpose of this paper is to understand if there is a customer perceived value for shareholders in investing in Islamic stocks, by using KMI30 index of Karachi Stock Exchange as a case study. The findings are then used to devise a conceptual model, highlighting the value of an Islamic branded index and for companies included on the index for market participants, Shari'ah‐compliant firms, and governments.

This is an exploratory research paper. A detailed literature review is followed by a quantitative analysis of the return series of 18 constituents of the KMI30 index. The analysis looks at performance before and after the launch of the index, to identify if inclusion on the Islamic index has impacted the average returns and volatility of the constituents and if it is considered as value added by the investors.

Analysis reveals that the KMI30 index is marginally less volatile than the KSE100 index and has relatively better returns, even in the most volatile times at the Karachi Stock Exchange. Most of the constituents under analysis have posted better returns after inclusion on the index, with 40 per cent of them showing less volatility. Though the trends are not clearly visible, there is an indication of increased returns and reduced volatility, both in the Islamic index and its constituents.

This study is the first step in analyzing if shareholders perceive inclusion of a company on the Islamic index as value added, resulting in increased share prices, better returns, and decreased volatility. Due to the lack of literature on the subject, the nature of the study is exploratory. Further analysis is required to understand if the changes in returns and volatility are due to investor perceptions. This study has implications for the organizations to understand the perception of investors about including companies on the Islamic index. If investors attach value to this proposition then it will be worthwhile for companies to invest resources in making their organization Shari'ah compliant and marketing it from that perspective. Additionally, this study will add to the knowledge of the regulators regarding whether the Islamic index is achieving its objectives of providing investment opportunities to investors offering better returns with less risk, besides being “Halal”.

There is a lack of studies that look at Islamic investments from the marketing perspective. Also, to the best of the authors' knowledge, no studies have analyzed the KMI30 index, either from a finance or marketing perspective. This study is the authors' contribution to the interdisciplinary body of knowledge and ever‐increasing literature on emerging markets in the context of Islamic investments.

This paper aims at examining the co-movement dependent regime and causality relationships between conventional and Islamic returns for emerging, frontier and developed markets from November 2008 to August 2020.

First, the authors used the Markov-switching autoregression (MS–AR) model to capture the regime-switching behavior in the stock market returns. Second, the authors applied the Markov-switching regression and vector autoregression (MS-VAR) models in order to study, respectively, the co-movement and causality relationship between returns of conventional and Islamic indexes across market states.

Results show the presence of two different regimes for the three studied markets, namely, stability and crisis periods. Also, the authors found evidence of a co-movement relationship between the conventional and Islamic indexes for the three studied markets whatever the regime. For the Granger causality, it is proved only for emerging and developed markets and only during the stability regime. Finally, the authors conclude that Islamic indexes can act as diversifiers, or safe-haven assets are not strongly supported.

This paper is the first study that examines the co-movement and the causal relationship between conventional and Islamic indexes not only across different financial markets' regimes but also during the COVID-19 period. The findings may help investors in making educated decisions about whether or not to add Islamic indexes to their portfolios especially during the recent outbreak.