Examining the performance of Shari’ah-compliant versus conventional stock indexes: A comparative analysis pre‑, during, and post-COVID-19

Abu-Alkhei Ahmad M. (), Alsharari Nizar M. (), Khan Walayet A. (), Ramzani Sara R. () and Horam Phungmayo ()
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Abu-Alkhei Ahmad M.: GISMA University of Applied Sciences, Multidisciplinary Research Centre for Innovations in SMEs (MrciS), Konrad-Zuse-Ring 11, 14469 Potsdam, Germany
Alsharari Nizar M.: Jackson State University, 1400 John R. Lynch St. Jackson, MS 39217, USA
Khan Walayet A.: Schroeder Family School of Business Administration, University of Evansville, 1800 Lincoln Avenue, Evansville, IN 47722, USA
Ramzani Sara R.: GISMA University of Applied Sciences, Multidisciplinary Research Centre for Innovations in SMEs (MrciS), Konrad-Zuse-Ring 11, 14469 Potsdam, Germany
Horam Phungmayo: GISMA University of Applied Sciences, Multidisciplinary Research Centre for Innovations in SMEs (MrciS), Konrad-Zuse-Ring 11, 14469 Potsdam, Germany

Economics and Business Review, 2024, vol. 10, issue 2, 31-59

Abstract: This study aims to conduct an empirical comparative analysis of the performance of Shari’ah and conventional stock indexes during the period 2017–2023, which includes the COVID-19 pandemic. Additionally, it aims to investigate investors’ preferences and analyse the long-term relationship of these indexes, as well as exploring the potential diversification benefits. The research methodology incorporates stochastic dominance analysis, the VARMAX procedure, and Johansen’s co-integration approach. The data utilized consists of 31 conventional and 31 Islamic stock indexes, specifically from the FTSE, DJ, MSCI, and S&P series. The results show that there are no long-term co-integration links between 30 out of 31 pairs of Islamic and conventional indexes. While conventional indexes tend to outperform Islamic indexes, they also come with a higher risk. On the other hand, Islamic indexes are considered to be less risky, offering potential diversification opportunities that may be attractive for global portfolios, particularly during periods of financial distress.

Keywords: Islamic finance; indexes; stochastic dominance; COVID-19 (search for similar items in EconPapers)
JEL-codes: C14 G17 Z12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobur:v:10:y:2024:i:2:p:31-59:n:1005

DOI: 10.18559/ebr.2024.2.1177

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