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Article

The Price of Faith: Performance, Bull
and Bear Markets, and Screening Effects
of Islamic Investing Around the Globe

Sebastian Lobe, Felix Rößle and Christian Walkshäusl
The Journal of Investing Winter 2012, 21 (4) 153-164; DOI: https://doi.org/10.3905/joi.2012.21.4.153
Sebastian Lobe
is professor and chair of Finance and Banking II at the WHL Graduate School of Business and Economics and the FACT Center in Lahr, Germany.
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  • For correspondence: sebastian.lobe@whl-lahr.de
Felix Rößle
is a graduate student at the University of Regensburg in Regensburg, Germany.
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  • For correspondence: felix.roessle@stud.uni-regensburg.de
Christian Walkshäusl
is an assistant professor of finance at the University of Regensburg in Regensburg, Germany.
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  • For correspondence: christian.walkshaeusl@ur.de
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Abstract

In recent years, Islamic investing has emerged as a dynamic and quickly growing segment of the worldwide financial services industry. This article extends the international evidence to a much broader sample of 155 indices around the world. We contribute to the literature in several ways. First, using the Sharpe ratio, the CAPM, and the four-factor model, we find no evidence of an out- or underperformance of Islamic indices. Also, Islamic investing tends to have a growth and positive momentum bias. Both insights reconfirm results of previous studies. Second, we reexamine the performance of Islamic indices in bull and bear markets. Our evidence reverses prior results in the literature employing a different sample period. We interpret the evidence as Islamic screens not affecting unconditional performance through the cycle, but affecting performance conditional on the cycle in a manner which is, however, not easy to forecast. This is the price of Islamic investing bearing an unforeseeable chance or risk depending on the market climate. Third, we analyze the influence of screening methods on the performance of Islamic indices suggesting that there is no significant difference between Islamic screens and their performance.

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The Journal of Investing: 21 (4)
The Journal of Investing
Vol. 21, Issue 4
Winter 2012
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The Price of Faith: Performance, Bull
and Bear Markets, and Screening Effects
of Islamic Investing Around the Globe
Sebastian Lobe, Felix Rößle, Christian Walkshäusl
The Journal of Investing Nov 2012, 21 (4) 153-164; DOI: 10.3905/joi.2012.21.4.153

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The Price of Faith: Performance, Bull
and Bear Markets, and Screening Effects
of Islamic Investing Around the Globe
Sebastian Lobe, Felix Rößle, Christian Walkshäusl
The Journal of Investing Nov 2012, 21 (4) 153-164; DOI: 10.3905/joi.2012.21.4.153
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  • Article
    • Abstract
    • ISLAMIC INDICES AND SCREENS
    • DATA AND SUMMARY STATISTICS
    • PERFORMANCE
    • TIME SERIES REGRESSION METHODOLOGY AND DATA
    • BULL AND BEAR MARKETS
    • QUANTITATIVE COMPARISON OF SCREENING CRITERIA
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
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