Diversification Benefits of Shari’ah Compliant Equity ETFs in Emerging Markets

Posted: 10 Sep 2019

See all articles by Panagiotis Andrikopoulos

Panagiotis Andrikopoulos

Centre for Financial and Corporate Integrity (CFCI), Coventry University

Samar Gad

Independent

Date Written: October 23, 2018

Abstract

Previous studies on the performance of Islamic finance and banking have been more comparative than experimental when it comes to the role and effect of Islamic (Shari'ah compliant) assets in a conventional setting. This paper investigates whether Shari'ah compliant exchange-traded funds (ETFs) have potential diversification benefits to a volatile portfolio of conventional investments in emerging markets. The results suggest that such assets not only improve the risk-adjusted returns of portfolios but also receive proportionally higher weight during crisis periods. Hence, institutional investors should consider the ‘religion effect’ when they manage their assets, given the evidence regarding the out performance of Shari'ah compliant equity relative to their conventional peers.

Keywords: Emerging markets Islamic assets Dynamic optimisation, ETFs

JEL Classification: G01, G010, G11, G23

Suggested Citation

Andrikopoulos, Panagiotis and Gad, Samar, Diversification Benefits of Shari’ah Compliant Equity ETFs in Emerging Markets (October 23, 2018). Pacific Basin Finance Journal, Vol. 53, pp. 133-144;DOI: 10.1016/j.pacfin.2018.10.009. Available at SSRN: https://ssrn.com/abstract=3446800

Panagiotis Andrikopoulos (Contact Author)

Centre for Financial and Corporate Integrity (CFCI), Coventry University ( email )

Priory Street
Coventry, CV1 5FB
United Kingdom
+44(0)247 765 7920 (Phone)

Samar Gad

Independent ( email )

No Address Available

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