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Faith-based norms and portfolio performance: Evidence from India

Author

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  • Dharani, M.
  • Hassan, M. Kabir
  • Paltrinieri, Andrea

Abstract

This paper investigates the performance of Shariah and conventional stock portfolios in India during the period 2001–2017 by using asset pricing models. We first examine the influence of Shariah investment principles on the stock returns' cross-section. Then we assess the overall risk of Shariah and conventional portfolios, focusing also on financial crises. We provide evidence of a positive Shariah effect on stock returns in India. Therefore, Shariah stocks offer higher returns than non-Shariah stocks. We also find that Shariah portfolios have lower risk than unconstrained conventional ones. Overall our results reveal that both portfolios have similar performance, but the Shariah portfolio has a lower level of risk. Finally, the results clearly indicate that the volatility of the Shariah portfolio is lower during the crisis period.

Suggested Citation

  • Dharani, M. & Hassan, M. Kabir & Paltrinieri, Andrea, 2019. "Faith-based norms and portfolio performance: Evidence from India," Global Finance Journal, Elsevier, vol. 41(C), pages 79-89.
    • Handle: RePEc:eee:glofin:v:41:y:2019:i:c:p:79-89
    DOI: 10.1016/j.gfj.2019.02.001
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    Cited by:

    1. Amen Aissi Harzallah & Mouna Boujelbene Abbes, 2020. "The Impact of Financial Crises on the Asset Allocation: Classical Theory Versus Behavioral Theory," Journal of Interdisciplinary Economics, , vol. 32(2), pages 218-236, July.
    2. Camgöz, Mevlüt & Topal, Mehmet Hanefi, 2022. "Identifying the asymmetric price dynamics of Islamic equities: Implications for international investors," Research in International Business and Finance, Elsevier, vol. 60(C).
    3. Kok, Seng Kiong & Shahgholian, Azar, 2023. "The impact of proximity within elite corporate networks on the Shariah governance-firm performance nexus: Evidence from the global Shariah elite," Emerging Markets Review, Elsevier, vol. 54(C).
    4. Khan, Abdullah & Rizvi, Syed Aun R. & Ali, Mohsin & Haroon, Omair, 2021. "A survey of Islamic finance research – Influences and influencers," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).
    5. Kok, Seng Kiong & Filomeni, Stefano, 2021. "The holding behavior of Shariah financial assets within the global Islamic financial sector: A macroeconomic and firm-based model," Global Finance Journal, Elsevier, vol. 50(C).
    6. Umar, Zaghum & Gubareva, Mariya, 2021. "Faith-based investments and the Covid-19 pandemic: Analyzing equity volatility and media coverage time-frequency relations," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    7. Rasha Tawfiq Abadi & Florinda Silva, 2022. "Do Islamic fundamental weighted indices outperform their conventional counterparts? An empirical investigation during the crises in the MENA region," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 12(2), pages 241-266, June.

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    More about this item

    Keywords

    Portfolio management; Shariah portfolio; Islamic finance; Asset pricing; India;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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