Do commodities improve the performance of international Islamic stock portfolios? An analysis for pre-and during COVID-19 pandemic

This paper investigates the potential portfolio diversification benefits through introducing commodities to international Islamic stock portfolios through the period 2016-2020. Different types of asset investment strategies such as equally weighted portfolios (1/N), risk-parity, reward-to-risk timing, minimum-variance, mean-variance, and Black-Litterman have been used. Also, we apply the bootstrap methodology of Ledoit and Wolf (2008) to test for the difference of Sharpe ratios. Generally, empirical results display that the introduction of commodities improves the performance of the International Islamic stock portfolios over the complete sample, the pre-COVID-19 and the COVID-19 periods. However, the difference in performance between international Islamic stock-commodity and international Islamic stock portfolios is not statistically significant for the diverse asset investment approaches across the different studied periods. These findings have noteworthy implications for global investors who prefer to diversify only in Islamic equities.