Does the degree of Shari’ah compliance affect the volatility? Evidence from the MENA region

Ahmed, Neveen; Farooq, Omar

doi:10.1016/j.ribaf.2017.07.143

Cited by 11 publications

(16 citation statements)

References 11 publications

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“…This can be a further explanation of the comparative outperformance of the Sharīʿah index. The findings are supported by several earlier studies such as Al-Zoubi and Maghyereh (2007), Chiadmi and Ghaiti (2012), Karim et al (2014), Alexakis et al (2015), Ahmed and Farooq (2018) and González et al (2019), but contradict with the studies such as Abu-Alkheil et al (2017). The findings of the cointegration test suggest that both indices are associated in the long-run.…”

Section: Results Analysissupporting

confidence: 62%

“…They note that the results do not change significantly when tested the same at different sub-periods. These findings are also supported by Alexakis et al (2015), Ahmed and Farooq (2018), Erragragui et al (2018), González et al (2019) and Tahir and Ibrahim (2020). In contrast, Hussein and Omran (2005), Habib and Islam (2014) and Rana and Akhter (2015) find that the Sharīʿah indices underperform their conventional counterparts in Bahrain, India and Pakistan, respectively.…”

Section: Literature Reviewsupporting

confidence: 63%

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Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

Hasan

Rafiq

Wahid

2020

IMEFM

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Purpose This paper aims to examine whether the Sharīʿah indices outperform the conventional indices as evident from Dhaka Stock Exchange (DSE). To achieve the objective, the study, first, assesses the risk adjusted returns of the Sharīʿah and conventional indices and compares the same between the two indices. Second, it examines the short-run and long-run associations between the two indices. Design/methodology/approach The DSEX Sharīʿah index and DSE broad index of the DSE are used as representatives of the Sharīʿah and conventional indices, respectively. The study uses monthly data for the period 2014–2018 and applies a number of techniques such as risk adjusted returns, Johansen’s cointegration test, vector error correction model, Granger causality test, forecast error variance decomposition and impulse response functions techniques. Findings The study reveals that albeit there is no significant difference in simple mean between the two indices, the Sharīʿah index outperforms its conventional counterpart based on the risk adjusted returns. The two indices are associated only in the long-run, while no causal relationship is spotted between them. The overall results show that the Sharīʿah index has dominance over the conventional index in Bangladesh. Research limitations/implications The study could use more pairs of indices, including additional variables such as financial crisis and macroeconomic variables. Practical implications The study has important implications to investors, especially the religious Muslims and ethical ones, who are suggested to invest their funds in the Sharīʿah index without sacrificing returns, rather be monetarily more benefited. Moreover, the other investors can generate diversification benefits by adding both Sharīʿah and conventional indices in their portfolios in the short-run. Originality/value Unlike previous studies, this study endeavors to use a comprehensive methodology to conduct its analysis. Moreover, this is supposedly the first ever effort to conduct such a study in the context of Bangladesh.

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Section: Results Analysissupporting

confidence: 62%

Section: Literature Reviewsupporting

confidence: 63%

Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

Hasan

Rafiq

Wahid

2020

IMEFM

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“…In addition, it promotes risk-sharing and ethical investment and therefore, Islamic stocks are exposed to less uncertainty compared to conventional stocks. Our findings are in line with the findings of Ahmed and Farooq (2018) who document that portfolios with the highest level of Shariah compliances exhibit lower volatility than the least Shariah compliant and market portfolios. Table 2 reports the findings of the relationship between risk and business cycles.…”

Section: Methodssupporting

confidence: 92%

“…Further, Ahmed and Farooq (2018) examine whether the degree of Shariah compliance influence stock volatility before and after financial crisis. They find that market portfolios, the most and the least Shariah compliant portfolios increase volatility after the financial crisis.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Consistent with Al-Zoubi and Maghyereh (2007), Dharani and Natarajan (2011) find that Islamic stocks have lower level of risk than conventional stocks in the Indian stock market. Ahmed and Farooq (2018) document that portfolios with the highest level of Shariah compliances exhibit lower volatility than the least Shariah compliant and market portfolios for the seven Middle East and North Africa (MENA) countries. However, Charles, Darne and Pop (2015) find contradictory results that Dow Jones Islamic Indices are more risky than conventional indices due to the lack of diversification in the Islamic indices.…”

Section: Introductionmentioning

confidence: 99%

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Risk, Business Cycles and Financial Crises: Evidence from Islamic and Conventional Stocks

Tee¹,

Kew²

2019

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This study examines whether business cycles and financial crises affect the risk of Islamic stocks compared to conventional stocks in Malaysia for the period 1997 to 2016. The findings conclude that business cycles play a crucial role in affecting stock risk. Specifically, stock risk tends to be higher during the economic contraction than during economic expansion for Islamic, conventional and all stocks. We further test whether Asian and Global financial crises exacerbate stock risk. The results document that the level of stock risk increases during financial crises. Moreover, we find that the impact of economic contraction and financial crises on increasing stock risk remain significant after controlling for various variables known to have effect on risks. In addition, we discover that the risk of Islamic stock is lower compared to those of conventional and all stocks during the economic contraction and financial crises. This recommends the diversification advantage and investment opportunity of the Islamic stocks during the periods of financial turbulence. The findings offer important insights to investors who are considering Islamic or conventional stocks as potential investment and to policymakers in evaluating stock risk in different economic states.2 Kata kunci: Saham Islam dan konvensional; risiko saham; kitaran perniagaan; pengembangan dan pengecutan ekonomi; krisis kewangan

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Islamic stock market versus conventional: Are islamic investing a ‘Safe Haven’ for investors? A systematic literature review

Foglie

Panetta

2020

Pacific-Basin Finance Journal

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Does the degree of Shari’ah compliance affect the volatility? Evidence from the MENA region

Cited by 11 publications

References 11 publications

Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

Do ‘Shariah’ indices surpass conventional indices? A study on Dhaka Stock Exchange

Risk, Business Cycles and Financial Crises: Evidence from Islamic and Conventional Stocks

Islamic stock market versus conventional: Are islamic investing a ‘Safe Haven’ for investors? A systematic literature review

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