Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC

There is argument that Shari’ah compliant portfolios are at a disadvantage in terms of portfolio diversification given that the exclusion of “sin stocks” shrinks the Islamic investor’s investment universe. This paper investigates firstly, whether there is empirical evidence to substantiate such a cl...

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Main Authors:	Mustaffa Kamil, Nazrol Kamil, Bacha, Obiyathulla Ismath, Masih, Mansur
Format:	Conference or Workshop Item
Language:	English
Published:	2012
Subjects:	HG3368 Islamic Banking and Finance HG4501 Stocks, investment, speculation
Online Access:	http://irep.iium.edu.my/67447/ http://irep.iium.edu.my/67447/ http://irep.iium.edu.my/67447/1/MFA%20Conference%202012%20-%20Kamil%2C%20Bacha%20and%20Masih.pdf

id	iium-67447
recordtype	eprints
spelling	iium-674472019-04-23T07:17:30Z http://irep.iium.edu.my/67447/ Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC Mustaffa Kamil, Nazrol Kamil Bacha, Obiyathulla Ismath Masih, Mansur HG3368 Islamic Banking and Finance HG4501 Stocks, investment, speculation There is argument that Shari’ah compliant portfolios are at a disadvantage in terms of portfolio diversification given that the exclusion of “sin stocks” shrinks the Islamic investor’s investment universe. This paper investigates firstly, whether there is empirical evidence to substantiate such a claim, and secondly, can something be done to alleviate this disadvantage. Our results show that there are statistical evidences that Islamic portfolios are deprived of some benefits of diversification, at the sector level. However, the empirical evidences do not permit us to generalize such a finding at the specific stock level. By analyzing the temporal characteristics of correlations using MGARCH-DCC, we argue that Islamic portfolios can minimize loss of diversification benefit by adopting appropriate portfolio allocation strategies. In particular, market sentiment and commodity prices are two key variables that can drive portfolio allocation switching decisions. In short, while there are some evidences that investors of Shari’ah compliant portfolios are denied of some additional benefits of diversification, there are arguably avenues to mitigate such a disadvantage. 2012 Conference or Workshop Item NonPeerReviewed application/pdf en http://irep.iium.edu.my/67447/1/MFA%20Conference%202012%20-%20Kamil%2C%20Bacha%20and%20Masih.pdf Mustaffa Kamil, Nazrol Kamil and Bacha, Obiyathulla Ismath and Masih, Mansur (2012) Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC. In: The Malaysian Finance Association 13th Annual Conference 2011, 10th-12th June 2011, Langkawi. (Unpublished) https://www.mfa.com.my/conference/previous-conference/
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG3368 Islamic Banking and Finance HG4501 Stocks, investment, speculation
spellingShingle	HG3368 Islamic Banking and Finance HG4501 Stocks, investment, speculation Mustaffa Kamil, Nazrol Kamil Bacha, Obiyathulla Ismath Masih, Mansur Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC
description	There is argument that Shari’ah compliant portfolios are at a disadvantage in terms of portfolio diversification given that the exclusion of “sin stocks” shrinks the Islamic investor’s investment universe. This paper investigates firstly, whether there is empirical evidence to substantiate such a claim, and secondly, can something be done to alleviate this disadvantage. Our results show that there are statistical evidences that Islamic portfolios are deprived of some benefits of diversification, at the sector level. However, the empirical evidences do not permit us to generalize such a finding at the specific stock level. By analyzing the temporal characteristics of correlations using MGARCH-DCC, we argue that Islamic portfolios can minimize loss of diversification benefit by adopting appropriate portfolio allocation strategies. In particular, market sentiment and commodity prices are two key variables that can drive portfolio allocation switching decisions. In short, while there are some evidences that investors of Shari’ah compliant portfolios are denied of some additional benefits of diversification, there are arguably avenues to mitigate such a disadvantage.
format	Conference or Workshop Item
author	Mustaffa Kamil, Nazrol Kamil Bacha, Obiyathulla Ismath Masih, Mansur
author_facet	Mustaffa Kamil, Nazrol Kamil Bacha, Obiyathulla Ismath Masih, Mansur
author_sort	Mustaffa Kamil, Nazrol Kamil
title	Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC
title_short	Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC
title_full	Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC
title_fullStr	Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC
title_full_unstemmed	Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC
title_sort	do sin stocks deprive islamic stock portfolios of diversification? some insights from the use of mgarch-dcc
publishDate	2012
url	http://irep.iium.edu.my/67447/ http://irep.iium.edu.my/67447/ http://irep.iium.edu.my/67447/1/MFA%20Conference%202012%20-%20Kamil%2C%20Bacha%20and%20Masih.pdf
first_indexed	2023-09-18T21:35:45Z
last_indexed	2023-09-18T21:35:45Z
_version_	1777412808663629824

Do sin stocks deprive Islamic stock portfolios of diversification? some insights from the use of MGARCH-DCC

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