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Examining the performance of Shari’ah-compliant versus conventional stock indexes: A comparative analysis pre‑, during, and post-COVID-19

Author

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  • Abu-Alkhei Ahmad M.

    (GISMA University of Applied Sciences, Multidisciplinary Research Centre for Innovations in SMEs (MrciS), Konrad-Zuse-Ring 11, 14469 Potsdam, Germany)

  • Alsharari Nizar M.

    (Jackson State University, 1400 John R. Lynch St. Jackson, MS 39217, USA)

  • Khan Walayet A.

    (Schroeder Family School of Business Administration, University of Evansville, 1800 Lincoln Avenue, Evansville, IN 47722, USA)

  • Ramzani Sara R.

    (GISMA University of Applied Sciences, Multidisciplinary Research Centre for Innovations in SMEs (MrciS), Konrad-Zuse-Ring 11, 14469 Potsdam, Germany)

  • Horam Phungmayo

    (GISMA University of Applied Sciences, Multidisciplinary Research Centre for Innovations in SMEs (MrciS), Konrad-Zuse-Ring 11, 14469 Potsdam, Germany)

Abstract

This study aims to conduct an empirical comparative analysis of the performance of Shari’ah and conventional stock indexes during the period 2017–2023, which includes the COVID-19 pandemic. Additionally, it aims to investigate investors’ preferences and analyse the long-term relationship of these indexes, as well as exploring the potential diversification benefits. The research methodology incorporates stochastic dominance analysis, the VARMAX procedure, and Johansen’s co-integration approach. The data utilized consists of 31 conventional and 31 Islamic stock indexes, specifically from the FTSE, DJ, MSCI, and S&P series. The results show that there are no long-term co-integration links between 30 out of 31 pairs of Islamic and conventional indexes. While conventional indexes tend to outperform Islamic indexes, they also come with a higher risk. On the other hand, Islamic indexes are considered to be less risky, offering potential diversification opportunities that may be attractive for global portfolios, particularly during periods of financial distress.

Suggested Citation

  • Abu-Alkhei Ahmad M. & Alsharari Nizar M. & Khan Walayet A. & Ramzani Sara R. & Horam Phungmayo, 2024. "Examining the performance of Shari’ah-compliant versus conventional stock indexes: A comparative analysis pre‑, during, and post-COVID-19," Economics and Business Review, Sciendo, vol. 10(2), pages 31-59.
    • Handle: RePEc:vrs:ecobur:v:10:y:2024:i:2:p:31-59:n:1005
    DOI: 10.18559/ebr.2024.2.1177
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    References listed on IDEAS

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    2. Naji Mansour Nomran & Razali Haron, 2021. "The impact of COVID-19 pandemic on Islamic versus conventional stock markets: international evidence from financial markets," Future Business Journal, Springer, vol. 7(1), pages 1-16, December.
    3. Buerhan Saiti & Obiyathulla I. Bacha & Mansur Masih, 2014. "The diversification benefits from Islamic investment during the financial turmoil: The case for the US-based equity investors," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 14(4), pages 196-211, December.
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    6. Goodell, John W., 2020. "COVID-19 and finance: Agendas for future research," Finance Research Letters, Elsevier, vol. 35(C).
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    More about this item

    Keywords

    Islamic finance; indexes; stochastic dominance; COVID-19;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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