Faith-Based Ethical Investing: The Case of Dow Jones Islamic Indexes

M. Kabir Hassan and Eric Girard

No 2011-WP-05, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: This paper examines the performance of seven indexes chosen from the Dow Jones Islamic Market Index (DJIM) vis-à-vis their non-Islamic counterparts using a variety of measures such as Sharpe, Treynor, Jensen and Fama’s selectivity, net selectivity and diversification. Second, we examine the persistence of performance using Carhart’s (1997) four factor pricing models. Third, we use cointegration to examine how the Islamic indexes compare to their non-Islamic counterparts. The sample period is from January 1996 to December 2005 (120 data points). It is further broken down into two sub-periods: January 1996 to December 2000 (60 data points) and January 2001 to December 2006 (60 data points). We find no difference between Islamic and non-Islamic indexes. The Dow Jones Islamic indexes outperform their conventional counterparts from 1996 to 2000 and underperform them from 2001 to 2005. Overall, similar reward to risk and diversification benefits exist for both the Islamic and conventional indexes.

Keywords: Ethical Investing; Dow Jones Islamic Market Index; Performance Measures (search for similar items in EconPapers)
JEL-codes: G11 G15 G24 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2011-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Related works:
Journal Article: FAITH-BASED ETHICAL INVESTING: THE CASE OF DOW JONES ISLAMIC INDEXES (2010)
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