RT Journal Article
SR Electronic
T1 The Price of Faith: Performance, Bull
and Bear Markets, and Screening Effects
of Islamic Investing Around the Globe
JF The Journal of Investing
FD Institutional Investor Journals
SP 153
OP 164
DO 10.3905/joi.2012.21.4.153
VO 21
IS 4
A1 Sebastian Lobe
A1 Felix Rößle
A1 Christian Walkshäusl
YR 2012
UL https://pm-research.com/content/21/4/153.abstract
AB 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.TOPICS: Mutual funds/passive investing/indexing, ESG investing, global