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Do Islamic fundamental weighted indices outperform their conventional counterparts? An empirical investigation during the crises in the MENA region

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  • Rasha Tawfiq Abadi

    (University of Minho
    Arab American University)

  • Florinda Silva

    (University of Minho)

Abstract

This paper investigates the performance of Islamic fundamental weighted (FW) portfolios compared to that of non-Islamic counterparts, to examine whether Shari’ah-compliant stocks can protect investors during crises in the Middle East and North Africa region. Portfolios’ performance is assessed using several risk-adjusted performance measures including more robust measures in the context of recently developed multi-factor models. The study’s findings suggest that the performance of Islamic and non-Islamic FW portfolios depends on the performance measures used and on the periods under analysis. Both Islamic and non-Islamic FW portfolios underperform against the cap-weighted benchmark. Furthermore, the Islamic portfolios underperform compared to their non-Islamic counterparts during the period of the global financial crisis, while they perform similarly to their non-Islamic counterparts during the Arab Spring period. Based on these results, we conclude that Islamic FW portfolios do not seem to protect investors from losses during crises.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:eurase:v:12:y:2022:i:2:d:10.1007_s40822-020-00158-x
    DOI: 10.1007/s40822-020-00158-x
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