ARE THERE CAUSAL RELATIONSHIPS BETWEEN ISLAMIC VERSUS CONVENTIONAL EQUITY INDICES? INTERNATIONAL EVIDENCE

AMRI Henda El and Taher Hamza
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AMRI Henda El: ISG - University of Sousse, Tunisia
Taher Hamza: IHEC - University of Carthage, Tunisia

Studies in Business and Economics, 2017, vol. 12, issue 1, 40-60

Abstract: This paper investigates Islamic Versus Conventional market indexes’ performance. It analyzes also their short and long term relationship by testing cointegration, causality and impulse response functions. The sample period is from 2003 to 2011 and splited into 3 sub-periods: pre, during and post subprime crisis. Our findings provide evidence that first, index performance are somewhat mixed over the different period and through the different indices under consideration, and support the hypothesis that the impact of faith-based screens on investment performance is insignificant. Second, over the three sub-periods, there is no long run relationship between the Islamic indices and their conventional counterparts’ performance, except for the Islamic emerging markets indices. Third, in the short-run, we find different causal links between Islamic Versus non-Islamic indices over the three sub-periods. This finding is robust even after testing an impulse responses functions. Our findings have important implications for international portfolio diversification.

Keywords: Islamic indices; Conventional indices; Sharpe ratio; cointegration; impulse response functions; Sharia screening process (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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