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Conventional and Islamic stock price performance: An empirical investigation

Author

Listed:
  • Fredj Jawadi
  • Nabila Jawadi
  • Waël Louhichi
Abstract
The present paper studies the financial performance of Islamic and conventional indexes for three major regions: Europe, the USA and the World. The study covers the period 2000–2011, enabling us to capture the impact of the recent global financial crisis. To this end, we computed different performance ratios and estimated the CAPM-GARCH model to take into account the financial risk time-variation in order to provide precise performance evaluations. Our findings offer some interesting results and have diverse economic and policy implications. First, while conventional investments seemed promising before the crisis and during periods of calmness, Islamic funds have outperformed them since the subprime crisis began and in turbulent times, but this result is specific to the region under consideration and to the performance criterion. Second, the heterogeneous conclusions in terms of performance may reflect the different states of development of the Islamic finance industry in these regions. Third, we show that the impact of the 2008–2009 global financial crisis on Islamic markets is less significant than for conventional markets, suggesting that by keeping their eye on Islamic finance products, investors can expect some interesting investment opportunities.

Suggested Citation

  • Fredj Jawadi & Nabila Jawadi & Waël Louhichi, 2014. "Conventional and Islamic stock price performance: An empirical investigation," International Economics, CEPII research center, issue 137, pages 73-87.
    • Handle: RePEc:cii:cepiie:2014-q1-137-5
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    File URL: http://www.sciencedirect.com/science/article/pii/S2110701713000504
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    More about this item

    Keywords

    Financial performance; Islamic finance; Financial crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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