The Market Timing Ability and Return Performance of Islamic Equities: an Empirical Study

Nazeeruddin Mohammad () and Dawood Ashraf
Additional contact information
Nazeeruddin Mohammad: Prince Mohammad Bin Fahd University, Al Khobar, Saudi Arabia, Postal: College of Computer Engineering and Science, Prince Mohammad Bin Fahd University, Al Khobar, Saudi Arabia

No 1436-6, Working Papers from The Islamic Research and Teaching Institute (IRTI)

Abstract: This study investigates the determinants of return performance of Islamic equity indices (IEIs). Empirical evidence suggests that the selection of securities and rebalancing of funds to comply with Islamic screening standards may result in superior returns for the investing public. We employ an extended four factor dynamic condition correlation GARCH model to a sample of IEIs from different regions for the period 2002–2013. The empirical results indicate a statistically significant difference between IEIs from developed markets and those from emerging markets during the sample period. Findings suggest that Shari'ah screening helps IEIs to select securities of firms that are not financially distressed, are growth oriented and are exhibiting a positive momentum. We further investigated whether Shari'ah-based screening provides any superior market timing ability over conventional benchmark indices using both parametric and non-parametric approaches. Market timing results showed that the majority of IEIs have negative market timing ability reflecting the conservative nature of Islamic equity investments whereby Shari'ah discourages investment in equities of highly leveraged corporations.

Keywords: Islamic equities; Four factor model; Market timing; Non-parametric test (search for similar items in EconPapers)
JEL-codes: C14 G11 G15 G23 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2015-05-18
Note: Readers are requested to search the paper "TITLE" on publication page of IRTI website for free paper.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.irti.org/English/Research/Documents/WP-1436-06.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.irti.org:80 (nodename nor servname provided, or not known)

Related works:
Journal Article: The market timing ability and return performance of Islamic equities: An empirical study (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:irtiwp:1436_006

Access Statistics for this paper

More papers in Working Papers from The Islamic Research and Teaching Institute (IRTI) Contact information at EDIRC.
Bibliographic data for series maintained by Research Division ().