Comparison of methodologies of Shari'ah stock screening: the case of SAC SC Malaysia, FTSE Yasaar Dubai and Dow Jones Islamic market indices

Aida Shaiza Ismail Zakri, Shaikh Hamzah Abdul Razak and Zainal Abidin Mohd Tahir

International Journal of Business Forecasting and Marketing Intelligence, 2018, vol. 4, issue 4, 458-485

Abstract: On average the Islamic finance industry has grown by almost 20% per annum, a compound annual growth rate of 17% from 2009 to 2013 (IFSB, 2013) with its current assets estimated to be worth USD 2 trillion and is set to reach USD 5 trillion in year 2020. This paper aims to analyse three Shari'ah screening methodologies namely Securities Commission (Malaysia), FTSE NASDAQ Dubai Shari'ah Index Series and the Dow Jones Islamic Market Indices. A sample of 30 companies comprising Shari'ah and non-Shari'ah stocks invested by the Malaysian institutional funds were analysed. Our analysis shows that out of the 30 samples stocks, only eight companies passed the screening using the criteria of the three providers. The limitations of the study is the non-availability of detailed information such as type of bank accounts and debts, hence assumption made is that the cash are placed in conventional accounts unless indicated.

Keywords: Shari'ah stock screening; Securities Commission; Dow Jones; FTSE Dubai; quantitative screening; financial ratios; qualitative; quantitative. (search for similar items in EconPapers)
Date: 2018
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