Islamic Investing

Posted: 2 Mar 2012 Last revised: 2 May 2015

See all articles by Christian Walkshäusl

Christian Walkshäusl

University of Regensburg - Center of Finance

Sebastian Lobe

University of Maine

Date Written: March 1, 2012


Using a large international sample of 35 developed and emerging markets, we analyze whether Islamic indices exhibit a different performance to conventional benchmarks. While there is no compelling evidence of performance differences in robust Sharpe ratio tests and after controlling for market risk, we find a significantly positive four-factor alpha for the aggregate developed markets region. This out performance stems, however, mainly from the U.S. and is largely attributable to the exclusion of financial stocks in Sharia-screened portfolios. As the extensive downturn of financials is related to the recent financial crisis, we do not argue that this out performance will continue over time. The style analysis reveals that Islamic indices invest mainly in growth stocks and positive momentum stocks. This, for a passive portfolio intriguing result can, however, be explained by the strong sector allocation towards energy firms and their strong momentum characteristic during the sample period.

Keywords: Islamic Stocks, Socially Responsible Stocks, Performance Evaluation, Performance Attribution

JEL Classification: G11, G12, G15

Suggested Citation

Walkshäusl, Christian and Lobe, Sebastian, Islamic Investing (March 1, 2012). Review of Financial Economics, 2 (2012), 53-62, Available at SSRN:

Christian Walkshäusl

University of Regensburg - Center of Finance ( email )


Sebastian Lobe (Contact Author)

University of Maine ( email )

Maine Business School
5723 DP Corbett Business Building
Orono, ME Maine 04469
United States
+1 (207) 581-1975 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics