The cost of Sharia investing : comparative empirical study in Indonesian stock market / Muhammad Rifqi

Rifqi, Muhammad (2016) The cost of Sharia investing : comparative empirical study in Indonesian stock market / Muhammad Rifqi. Journal of Emerging Economies and Islamic Research (JEEIR), 4 (4). pp. 1-13. ISSN 2289 - 2559

Official URL: http://www.jeeir.com

Abstract

This study attempts to investigate the financial performance of Jakarta Islamic Index (JII) in comparison with more widely known Jakarta Composite Index (JCI). Using historical data from January 2004 to May 2015, we comprehensively measure returns and risk properties of the indices using mean returns, standard deviation, Sharpe ratio, Treynor ratio, Jensen Alpha, and Value-at-Risk, and evaluate their results. We also perform portfolio simulation to assess the diversification capability of JII from strategic asset allocation perspective. Our findings indicate that despite JII outperforms JCI during pre-crisis in terms of raw and risk-adjusted returns, it underperforms JCI in all other sub-periods. Meanwhile, in terms of risk characteristics, we find that JII is a clear inferior to JCI. Thus, in overall we argue that there is a substantial cost associated with Sharia investing in Indonesian Stock Market. Nevertheless, simulation results indicate that JII could serve as a valuable portfolio diversification tool, in which it succeeds in lowering the risk of the whole portfolio.

Metadata

Item Type: Article
Creators:
CreatorsID Num. / Email
Rifqi, MuhammadUNSPECIFIED
Subjects: H Social Sciences > HJ Public Finance > Finance, Islamic
Divisions: Universiti Teknologi MARA, Selangor > Puncak Alam Campus > Faculty of Business and Management
Journal or Publication Title: Journal of Emerging Economies and Islamic Research (JEEIR)
Journal: UiTM Journal > Journal of Emerging Economies and Islamic Research
ISSN: 2289 - 2559
Volume: 4
Number: 4
Page Range: pp. 1-13
Official URL: http://www.jeeir.com
Item ID: 19352
Uncontrolled Keywords: Islamic finance, Islamic stock index, Indonesian stock market, Sharia investing
URI: http://ir.uitm.edu.my/id/eprint/19352

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