Search results

1 – 10 of over 6000
To view the access options for this content please click here
Book part
Publication date: 20 May 2019

Salman Ahmed Shaikh, Abdul Ghafar Ismail and Mohd Adib Ismail

Muslim investors must comply with the ethical injunctions prescribed for them while making financial investments. As per Islamic principles, the use of Riba (interest)…

Abstract

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.

Details

Research in Corporate and Shari’ah Governance in the Muslim World: Theory and Practice
Type: Book
ISBN: 978-1-78973-007-4

Keywords

To view the access options for this content please click here
Article
Publication date: 1 December 2021

Mustapha Ishaq Akinlaso, Aroua Robbana and Nura Mohamed

This paper aims to investigate the risk-return and volatility spillover within the Tunisian stock market during the COVID-19 pandemic analyzing both the Islamic and…

Abstract

Purpose

This paper aims to investigate the risk-return and volatility spillover within the Tunisian stock market during the COVID-19 pandemic analyzing both the Islamic and conventional stocks’ performance.

Design/methodology/approach

Both symmetric (GARCH and GARCH-M) and asymmetric (Threshold GARCH and Exponential GARCH) models are used to analyze the market returns and volatility response. Standard and Poor’s (S&P) index has been used to test both the Islamic and conventional stocks within the Tunisian stock market.

Findings

The findings suggest that both Tunisia Islamic and conventional stock markets are highly persistent; however, the conventional stock index showed a negative return spillover on the Islamic stocks during the pandemic. The conventional stock index has also shown a higher exposure to risk for a lower amount of return, and evidence of potential diversification benefit between both indexes was found during the pandemic, whereas the Islamic market showed a positive leverage effect, indicating a positive correlation between past return and future return; the conventional index implied a negative leverage effect.

Originality/value

The value of this paper emerges in studying three main aspects that are specific to the Tunisian stock market. This includes COVID-19 effect of return spillovers, volatility transmission across both conventional and Islamic stock market within the local financial market.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

To view the access options for this content please click here
Article
Publication date: 23 September 2021

Slah Bahloul, Mourad Mroua, Nader Naifar and nader naifar

This paper aims to investigate whether Islamic indexes, Bitcoin and gold still act as hedges or/and “safe-haven” assets during the COVID-19 pandemic crisis. This paper…

Abstract

Purpose

This paper aims to investigate whether Islamic indexes, Bitcoin and gold still act as hedges or/and “safe-haven” assets during the COVID-19 pandemic crisis. This paper examines the role of the Morgan Stanley Capital International all-country world index, Islamic index, gold and Bitcoin as a hedge or safe-haven asset for the world conventional stock market over the period from April 30, 2015 to March 27, 2020.

Design/methodology/approach

In this paper, the authors re-evaluate the hedge and safe haven properties of Islamic indexes, gold and Bitcoin following Baur and Lucey’s (2010) and Baur and McDermott’s (2010) methodology.

Findings

Empirical results show that the Islamic index is not a hedge or a safe haven asset for the world conventional stock market during the recent coronavirus crisis period. Different from the whole period, the authors find that gold is a strong hedge but only a weak safe or is not a safe haven during the coronavirus sub-period. Bitcoin reports distinctive properties, as it acts as a weak hedge and not a safe-haven asset.

Originality/value

This paper is the first study that investigates whether the global Islamic index still acts as hedges or “safe-haven” assets during the new COVID-19 crisis period. The results can help investors make informed decisions when adding cryptocurrencies and Islamic indexes to their portfolios during the coronavirus crisis.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8394

Keywords

Content available
Article
Publication date: 8 June 2021

Shafiu Ibrahim Abdullahi

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Islamic Economic Studies, vol. 29 no. 1
Type: Research Article
ISSN: 1319-1616

Keywords

To view the access options for this content please click here
Article
Publication date: 8 February 2021

Zahid Siddique

Islamic banking was developed to serve two objectives: to replace interest-based loan system with profit and loss sharing investment modes and to promote equity in…

Abstract

Purpose

Islamic banking was developed to serve two objectives: to replace interest-based loan system with profit and loss sharing investment modes and to promote equity in resource allocation. The first objective is called procedural whereas the second one is termed consequential. Scholars have been debating about the success of Islamic banking in achieving these objectives. This paper aims to develop an index for measuring the extent of convergence between theory and practice of Islamic banking.

Design/methodology/approach

For measuring the procedural and consequential convergence between objectives and practice of Islamic banking, the paper derives a set of indicators from the celebrated theory of Islamic banking and then develops the methodology of ranking all banks in terms of those indicators.

Findings

The paper provides ranking of Islamic banks in Pakistan in the light of this index. The results indicate that none of the Islamic banks in Pakistan has been doing good enough to achieve the convergence, instead they are moving in the opposite direction over time.

Practical implications

Using the methodology developed in this paper, universal ranking of Islamic banks may be issued every year.

Originality/value

Scholars have proposed some indices for measuring the performance of Islamic banking. There are two basic problems with these proposed measures: they do not directly compare the performance of Islamic banking against its stated objectives and they naively use an additive form of index without explaining the reason for this choice, i.e. as to what are the desirable characteristics which their preferred mathematical form of index serves. The index proposed in this paper attempts to overcome these shortcomings.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 14 no. 2
Type: Research Article
ISSN: 1753-8394

Keywords

To view the access options for this content please click here
Article
Publication date: 26 August 2020

Fatma Alahouel and Nadia Loukil

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

Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Practical implications

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.

Originality/value

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.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 14 no. 1
Type: Research Article
ISSN: 1753-8394

Keywords

To view the access options for this content please click here
Article
Publication date: 10 June 2020

Mahfooz Alam and Valeed Ahmad Ansari

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

Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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.

Originality/value

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.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 13 no. 3
Type: Research Article
ISSN: 1753-8394

Keywords

To view the access options for this content please click here
Article
Publication date: 20 January 2020

Muhamad Abduh

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 1
Type: Research Article
ISSN: 1759-0817

Keywords

To view the access options for this content please click here
Article
Publication date: 11 July 2016

Issam Bousalam and Moustapha Hamzaoui

This paper aims to expand the literature on performance and volatility of Islamic funds and indices in comparison to their conventional unscreened counterparts, by…

Abstract

Purpose

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.

Design/methodology/approach

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).

Findings

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.

Practical implications

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.

Originality/value

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.

Details

Journal of Financial Regulation and Compliance, vol. 24 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

To view the access options for this content please click here
Article
Publication date: 23 August 2013

Saeed BinMahfouz and M. Kabir Hassan

There is a great deal of research that has been done to investigate the investment characteristics of conventional socially responsible investment portfolios compared to…

Downloads
4126

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

1 – 10 of over 6000