Examining the Performance of Islamic and Conventional Stock Indices: A Comparative Analysis

Asutay, Mehmet; Wang, Yumeng; Avdukić, Alija

doi:10.1007/s10690-021-09351-7

Cited by 16 publications

(16 citation statements)

References 32 publications

(44 reference statements)

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“…Through the CAPM–GARCH model, Jawadi et al (2014) conclude that before the global financial crisis (GFC) of 2008, conventional indexes outperform Islamic indexes, whereas Islamic indexes outperform conventional indexes after the GFC of 2008. Asutay et al (2021), using the CAPM–EGARCH model, find that Islamic indexes outperformed conventional indexes during the GFC period and the post-crisis phase, particularly in the European and Asia–Pacific markets. Using the SD methodology, Al-Khazali et al (2014) compare conventional Dow Jones indexes to Islamic Dow Jones indexes.…”

Section: Literature Reviewmentioning

confidence: 97%

“…However, through CAPM statistics, Suryadi et al (2021) find that the JII has larger excess returns while having the same risk as compared to its conventional counterparts in Indonesia. Asutay et al (2021), using the CAPM–EGARCH model, undertake performance comparison between Islamic and conventional indices based on four main markets: worldwide, the USA, Europe and Asia–Pacific. Their finding shows that Islamic indexes yield higher average returns and lower risks in comparison to conventional indexes.…”

Section: Literature Reviewmentioning

confidence: 99%

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Performance comparison between Islamic and conventional stocks: evidence from Pakistan's equity market

Jabeen

Kausar

2021

IJIF

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PurposeThis paper aims to examine the performance of Islamic and conventional stocks listed at the Pakistan Stock Exchange by using both parametric and non-parametric approaches. The motivation is to do risk-return analysis of Islamic stock prices and conventional stock prices.Design/methodology/approachIt uses various measures of performance, e.g. Sharpe ratio, Treynor ratio, Jensen's alpha, beta, generalized auto-regressive conditional heteroskedasticity and stochastic dominance. Using the Karachi Meezan Index-30 (KMI-30) and the Karachi Stock Exchange Index-30 (KSE-30) as proxies for Islamic and conventional stock prices, respectively, it examines the performance of Islamic and conventional stocks. The daily data of KMI-30 and KSE-30, covering period from June 9, 2009 to June 20, 2020 are used.FindingsThe results show that the overall KMI-30 outperforms the KSE-30. The returns of the KMI-30 are greater than the KSE-30. However, the risk and volatility of the KMI-30 and KSE-30 are similar. Further, the KMI-30 has higher excess returns per unit of total risk than the KSE-30. But both indexes have similar excess returns per unit of systematic risk. Moreover, the KMI-30 returns have stochastically dominance over the KSE-30 returns. These results reveal that the Islamic index performs better than the conventional index.Practical implicationsThe findings provide several practical implications in financial and investment decisions making by investors, managers and policymakers such as strategies for asset allocation and investment. Further, in risk management, it provides guidance for allocating portfolios and managing risk. The investment in Islamic stocks may mitigate potential risk within asset portfolios.Originality/valueThis research is unique in its approach to the analysis of the performance comparison of conventional and Islamic stock by using comprehensive parametric and non-parametric estimation techniques. Such research has not been undertaken in the Pakistan's equity market since.

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Section: Literature Reviewmentioning

confidence: 97%

Section: Literature Reviewmentioning

confidence: 99%

Performance comparison between Islamic and conventional stocks: evidence from Pakistan's equity market

Jabeen

Kausar

2021

IJIF

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“…Abdelsalam et al (2014b) concluded that the SRI funds outperform Islamic funds in comparison. In a recent study carried out by Asutay et al (2021), a comparison is made between performance of Islamic and conventional indices of the USA, Asia-Pacific, European and other worldwide markets during the period 2007 and 2019. The study reveals that the Islamic indices outperformed conventional indices during 2007–2009; however; the results remained inconclusive during 2009–2013 whereby only in European and Asia-Pacific markets, the Islamic indices showed better performance compared to conventional indices.…”

Section: Literature Reviewmentioning

confidence: 99%

Islamic equity indices: a focus group discussion

Hashmi

Ellahi

Ehsan

et al. 2022

JIABR

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Purpose The purpose of this study is to highlight key issues pertaining to making use of Islamic equity indices and proposing possible solutions to address the problems faced in advancement of the concept of Shariah investing (SI) with the aim to advance the discourse on the subject. Design/methodology/approach Online focus group discussion (FGD) was carried out in which ten Islamic finance researchers and analysts belonging to institutions considered as authority on the subject matter participated to share their viewpoints on Islamic equity indices. Content analysis on the collected data of FGD was carried out which has revealed six key themes. Findings Six broader themes were identified based on the analysis of FGD, which includes criteria for constructing Islamic equity indices, utilization of Islamic equity indices for comparison with conventional stock indices, stock market efficiency perspectives, reason for integration of different equity markets, investors’ awareness of SI and future directions of Islamic equity indices. Results of the study indicate that Islamic finance researchers and analysts opined that there is a need for revising the criteria for construction of Islamic equity indices. There are conflicting viewpoints regarding performance and efficiency of Islamic indices in comparison with conventional indices and main reasons for stock market integration are trade liberalization, globalization and other factors. Moreover, there is a need for making investors and other market players aware about the attractiveness of Islamic indices from investing point of view. Originality/value Based on this extensive literature review and as highlighted by Masih et al. (2018) in their recap of literature on Islamic equity indices indicating that there are bulk of empirical studies carried in the past in the domain, however, there is a dearth of theoretical and qualitative studies. Hence, this preliminary qualitative study not only makes theoretical contribution but also deploys FGD, which is rarely used in the similar context, and offers candid views of the participants on key issues pertaining to Islamic equity indices. This lends novelty to this study.

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“…Research from Ali et al (2022) and Jawadi et al (2019) stated that Islamic stocks are more stable and can survive better than conventional stocks during economic outbreaks. Research from Asutay et al (2022) and Majid (2018) also showed that Islamic stock outperformed conventional during the global financial crisis period (2007)(2008)(2009).…”

Section: Introductionmentioning

confidence: 99%

Sensitivity Islamic Stock Return in Asia: The Effect of Exchange Rate Volatility

Dewanti

Rusmita

Samad³

2022

JEBIS

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The current study focuses on the existence of exchange rate volatility that impacts the return of MSCI Islamic stocks in Asia emerging countries. The study also sees comparisons between Islamic emerging markets in Asia (India, China, and Korea) and Southeast Asia regions (Indonesia, Malaysia, Thailand, and the Philippines). This study's daily time series data is from January 2015 to June 2020, employing time series regression as an analysis technique. The EGARCH method is used to indicate the asymmetric model and examines the impact of both good and bad shocks generated. The results highlight that the volatility of the MSINI is statistically positive, whereas MSCNI and MSKRI show a significant adverse effect on volatility. On the other hand, Southeast Asia (MSIDI, MSMYI, MSTHI, and MSPH) has no significant effect on exchange volatility. It is interpreted that the currencies of Southeast Asian countries are not strong enough because they still depend on other exchange rates. This result can be utilized to invest in the Islamic stock market in Southeast Asia because it is not affected by exchange rate volatility. Investors can quickly react to sensitive stocks to avoid uncertainty in stock returns. The government must be advised to increase the fiscal stimulus space and provide ease of business in the real sector.

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Examining the Performance of Islamic and Conventional Stock Indices: A Comparative Analysis

Cited by 16 publications

References 32 publications

Performance comparison between Islamic and conventional stocks: evidence from Pakistan's equity market

Performance comparison between Islamic and conventional stocks: evidence from Pakistan's equity market

Islamic equity indices: a focus group discussion

Sensitivity Islamic Stock Return in Asia: The Effect of Exchange Rate Volatility

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