ETHICAL INVESTMENT: EMPIRICAL EVIDENCE FROM FTSE ISLAMIC INDEX

Khaled A. Hussein
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Khaled A. Hussein: Islamic Research & Training Institute, Postal: IDB, Jeddah, Saudi Arabia

Islamic Economic Studies, 2004, vol. 12-1, 22-40

Abstract: This paper examines the hypothesis that ethical investment has inferior performance compared with their unscreened benchmarks. We empirically test whether returns earned by investors who purchase shares in the FTSE Global Islamic Index are significantly different from their index counterpart (FTSE AllWorld Index). The sample period is divided into two sub-periods, bull period (July 1996 – March 2000) and bear period (April 2000 - August 2003). A comparison of the raw and risk-adjusted performance show that the Islamic index performs as well as the FTSE All-World index over the entire period. On the other hand, the Islamic index yields statistically significant positive abnormal returns in the bull market period, although it underperforms the counterpart index in the bear market period. In general, our findings show that the application of ethical screening does not have an adverse effect on the FTSE Global Islamic Index performance.

Date: 2004
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