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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.

The purpose of this chapter is to analyze the possible portfolio diversification opportunities between Asian Islamic market and other regions’ Islamic markets; namely USA, Europe, and BRIC. This study makes the initial attempt to fill in the gaps of previous studies by focusing on the proxies of global Islamic markets to identify the correlations among those selected markets by employing the recent econometric methodologies such as multivariate generalized autoregressive conditional heteroscedastic–dynamic conditional correlations (MGARCH–DCC), maximum overlap discrete wavelet transform (MODWT), and the continuous wavelet transform (CWT). By utilizing the MGARCH-DCC, this chapter tries to identify the strength of the time-varying correlation among the markets. However, to see the time-scale-dependent nature of these mentioned correlations, the authors utilized CWT. For robustness, the authors have applied MODWT methodology as well. The findings tend to indicate that the Asian investors have better portfolio diversification opportunities with the US markets, followed by the European markets. BRIC markets do not offer any portfolio diversification benefits, which may be explained partly by the fact that the Asian markets cover partially the same countries of BRIC markets, namely India and China. Considering the time horizon dimension, the results narrow down the portfolio diversification opportunities only to the short-term investment horizons. The very short-run investors (up to eight days only) can benefit through portfolio diversification, especially in the US and European markets. The above-mentioned results have policy implications for the Asian Islamic investors (e.g., Portfolio Management and Strategic Investment Management).

Introduction – The rapid flow of information between the markets eliminates the possibility of diversifying the portfolio by bringing the markets closer, and may cause the volatility in a market to spread to another market. In this context, revealing the relationships between conventional and participation markets or financial assets is important in terms of portfolio diversification and risk management.

Purpose – The major aim of this work is to analyse the existence of volatility spillover between conventional stock index and participation index based on the indexes in Turkish Capital Markets. BIST-30 and Katılım-30 indexes are used as the representatives of conventional stock index and participation index, respectively.

Methodology – Firstly, the univariate HYGARCH (1,d,1) parameters are calculated, and secondly, the dynamic equicorrelation (DECO) methodology is applied. DECO model is proposed to simplify structural assumptions by introducing a structure in which all twosomes of returns take the same correlation for a given time period. In this way, DECO model enables to have an optimal portfolio selection in comparison to an unrestricted time varying-dynamic correlation approaches and gives more advanced forecasting ability for the duration of the financial crisis periods compared to the various portfolios.

Findings – There is a strong correlation between BIST-30 and Katılım-30. They are affected by the same shocks. We expect to see different investor behaviours for Katılım-30 and BIST-30. However, they seem to have almost the same investor profile. In addition, there is a causality in both ways and volatility spillover between them.

The purpose of this paper is to bring the attention of Muslim world toward uniformity of Shariah principles. The paper also presents different opinions of experts toward standardization. Selection criteria of four different Islamic market indices are compared. Some points like Halal business and debt ratio are common, while others are different.

The qualitative research method has been used in this research work and various types of documents and research articles were analyzed. The authors analyzed the data of four Islamic stock markets in the world. First, they write all the screening criteria of every Islamic stock market for selecting a company for their stock market. Afterwards, they make a table that presents the comparison of screening criteria of all Islamic market indices.

A Shariah Board of Islamic Market approves any company as being Islamic Shariah-compliant based on certain criteria. Different Islamic market indices use their own criteria for selecting the company. Every Islamic market index has its own rules and regulations of the Shariah Board. Sometimes these rules are contradictory with each other; for example, if KMI-30 Islamic index is not selecting one particular company due to higher debt ratio but Dow Jones Islamic market index selects that company because that company meets the criteria of the Dow Jones Islamic market index.

The main limitation is that there is no approach to regulators of the different Islamic market indices around the globe.

If Islamic indices work on the suggestions provided in this paper, standardized criteria will be available to all indices and, consequently, confidence of the investors and operational issues will be resolved. Investment will be increased.

The belief of non-Muslims will be strong that Islamic laws are the same any where. A shift from conventional finance to Islamic Finance will be sped up.

This research work is original and first attempt on the topic of standardization of screening criteria of Islamic stock markets around the globe.

The purpose of this paper is to apply technical analysis to some leading Islamic indices and explore if these indices are amenable to the same kind of analysis as applied to conventional indices and whether technical analysis, in contrast with fundamental analysis, produces distinct or superior return.

In this paper, some basic tools of TA to Dow Jones Islamic Market US Index (IMUS) is applied in comparison with the three major market indices: Dow Jones Industrial Average, S&P 500 Index and NASDAQ 100. For TA, we apply moving averages, MACD and Stochastics as indicators. The paper is written particularly for those with interest in Islamic finance, but not necessarily familiar with TA. This paper thus also explores some Shariah-related issues in effectively applying TA.

The comparative analysis shows that the performance based on IMUS can be improved, when TA is applied.

Robust tools of TA play an important role in market research. This paper probably is the first to apply TA in the context of Islamic finance. Because the scope of this paper is limited (only Dow Jones Islamic USA Index and comparison with three leading market indices), more in-depth research is needed and possible, which it is hoped this paper will encourage.

The successful application of the basic TA tools to Islamic index will encourage the practitioners of Islamic finance to research and explore further uses and effectiveness of TA on other Islamic products.

This paper is probably the first application of TA to Islamic finance markets, written especially for those who take active interest in the financial market from Islamic perspective.

The purpose of this paper is to investigate the global influence of crude and refined oil futures prices on Dow Jones Islamic equity indices (DJIMI) during the recent global financial crisis under structural breaks in the conditional volatility of oil futures prices.

It aims at exploring the long-run and the short-run elasticity and causal relationships using an ARDL bound testing approach and a vector error correction model.

The main findings confirm the presence of long-run relationship for DJIM emerging markets index compared to other global and sub-regional developed indexes. Speed of adjustment to the long-run equilibrium is moderate and the effect of structural breaks, produced from nonlinear volatility model with long memory (LM), is overall not pronounced for that relationship. Short-run causality is bi-directional but long-run Granger causality does not run from refined oil to the DJIMI and crude oil.

The paper demonstrates the implicit extent of international financial integration of Islamic stock markets in light of the global influence of oil prices.

The findings offer some highlights to researchers, portfolio managers and policymakers.

The paper gives an answer to an identified need to test the position of Islamic equity markets as booming Islamic investment and socially responsible investment areas to the global influence of the new soaring path of oil markets. It uses as well bounds testing approach and tests weak and strong causalities under structural breaks. It considers as well LM behavior in oil prices along with the asymmetry property in oil prices.

The purpose of this paper is to evaluate the capability of the hidden Markov model using Googling investors’ sentiments to predict the dynamics of Islamic indexes’ returns in the Middle East and North Africa (MENA) financial markets from 2004 to 2018.

The authors propose a hidden Markov model based on the transition matrix to apprehend the relationship between investor’s sentiment and Islamic index returns. The proposed model facilitates capturing the uncertainties in Islamic market indexes and the possible effects of the dynamics of Islamic market on the persistence of these regimes or States.

The bearish state is the most persistent sentiment with the longest duration for all the MENA Islamic markets except for Jordan, Morocco and Qatar. In addition, the obtained results indicate that the effect of sentiment on predicting the future Islamic index returns is conditional on the MENA States. Besides, the estimated mean returns for each state indicates that the bullish and calm states are ideal for investing in Islamic indexes of Bahrain, Oman, Morocco, Kuwait, Saudi Arabia and United Arab Emirates. However, only the bullish state is ideal for investing Islamic indexes of Jordan, Egypt and Qatar.

This paper has used data at a monthly frequency that can explain only short-term dynamics between Googling investor’s sentiment and the MENA Islamic stock market returns. Moreover, this work can be done on the stock markets while taking into account the specificity of each activity sector.

In fact, the findings of this paper are helpful for academics, analysts and practitioners, and more specifically for the Islamic MENA financial investors. Moreover, this study provides useful insights not only into the duration of the relationship between the indexes’ returns and the investors’ sentiments in the five states but also into the transition probabilities which have implications for how investors could be guided in their choice of future investment in a portfolio with Islamic indexes. Findings of this paper are important and valuable for policy-makers and investors. Thus, predicting the effect of Googling investors’ sentiment on the MENA Islamic stock market dynamics is important for portfolio diversification by domestic and international investors. Moreover, the results of this paper gave new insights into financial analysts about the dynamic relationship between Googling investors’ sentiment and Islamic stock market returns across market regimes. Therefore, the findings of this study might be useful for investors as they help them capture the unobservable dynamics of the changes in the investors’ sentiment regimes in the MENA financial markets to make successful investment decisions.

To the best of the authors’ knowledge, this paper is the first to use the hidden Markov model to examine changes in the Islamic index return dynamics across five market sentiment states, namely the depressed sentiment (S1), the bullish sentiment (S2), the bearish sentiment (S3), the calm sentiment (S4) and the bubble sentiment (S5).

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.

This paper aims to survey the screening practices and regulatory arrangements that can be gleaned from the experience of Islamic financial indices on international stock markets. Such indices can be regarded as experiments in the demarcation of “pockets” of Sharī‘ah-compliant securities exchange, in the context of non-Sharī‘ah-compliant stock markets. They offer valuable regulatory precedent, with a view to the development of a transnational domain of Islamic financial transactions.

The paper leverages the experience of Islamic financial indices for charting the fault lines between the foundational principles of Islamic finance, and those of interest-based investment commonly accepted on international financial markets. It subsequently reviews the most salient regulatory arrangements in place for discriminating between permissible and forbidden securities and modes of trading, as implemented on Islamic financial indices. These include selection criteria for index inclusion, and Sharī‘ah committees with ex ante and ex post supervisory duties.

The paper makes a case for viewing Islamic finance indices on international capital markets as capacity-building experiments for the regulation of transnational Islamic financial flows.

The study rejuvenates the pragmatic approach towards the development of Islamic capital markets, by suggesting that incremental organisational innovations, as developed in connection with Islamic financial indices, can build institutional capacity towards an economy that abides by Islamic values.

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.