Are Islamic finance innovations enough for investors to escape from a financial downturn? Further evidence from portfolio simulations
Mohamed El Hedi Arouri
(1)
,
Hachmi Ben Ameur
(2)
,
Nabila Jawadi
(3)
,
Fredj Jawadi
(2, 4, 5, 6)
,
Waël Louhichi
(7)
Résumé
Does Islamic finance constitute a promising solution for the current global financial crisis and are Islamic financial innovations enough to reassure investors, stabilize financial systems and provide them with a means of escaping from financial downturns? This article addresses these questions while investigating the dynamics of Islamic and conventional stock prices over the last few years. In particular, we apply Multivariate Vector Autoregressive (VAR) tools to test the interaction between conventional and Islamic financial products, and implement the Granger causality test to specify the dependence orientation of feedback between Islamic and conventional stock prices. Our article differs from previous work on the topic in that it develops portfolio simulations to determine whether Islamic finance can supplant conventional finance by generating investment and diversification opportunities during periods of crisis. In addition, we develop optimal portfolio strategies and investment proportions for conventional and Islamic funds to ensure the best resource allocation. Our main findings are: (i) the impact of the current crisis on the Islamic finance industry is less marked than on conventional finance, (ii) investment in Islamic products generates high returns, (iii) portfolios that include Islamic products reduce systemic risk and generate significant diversification benefits, (iv) the US crisis has led to significant changes in resource allocation through changes in investment choices.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Article dans une revue |
Résumé |
en
Does Islamic finance constitute a promising solution for the current global financial crisis and are Islamic financial innovations enough to reassure investors, stabilize financial systems and provide them with a means of escaping from financial downturns? This article addresses these questions while investigating the dynamics of Islamic and conventional stock prices over the last few years. In particular, we apply Multivariate Vector Autoregressive (VAR) tools to test the interaction between conventional and Islamic financial products, and implement the Granger causality test to specify the dependence orientation of feedback between Islamic and conventional stock prices. Our article differs from previous work on the topic in that it develops portfolio simulations to determine whether Islamic finance can supplant conventional finance by generating investment and diversification opportunities during periods of crisis. In addition, we develop optimal portfolio strategies and investment proportions for conventional and Islamic funds to ensure the best resource allocation. Our main findings are: (i) the impact of the current crisis on the Islamic finance industry is less marked than on conventional finance, (ii) investment in Islamic products generates high returns, (iii) portfolios that include Islamic products reduce systemic risk and generate significant diversification benefits, (iv) the US crisis has led to significant changes in resource allocation through changes in investment choices.
|
Titre |
en
Are Islamic finance innovations enough for investors to escape from a financial downturn? Further evidence from portfolio simulations
|
Auteur(s) |
Mohamed El Hedi Arouri
1
, Hachmi Ben Ameur
2
, Nabila Jawadi
3
, Fredj Jawadi
2, 4, 5, 6
, Waël Louhichi
7
1
EDHEC -
EDHEC Business School
( 301965 )
- France
2
Amiens School of Management
( 234287 )
- France
3
IPAG Business School
( 542840 )
- 184 boulevard Saint-Germain, 75006 Paris
- France
4
EconomiX -
EconomiX
( 2564 )
- Bâtiment G
200 Avenue de la République
92001 NANTERRE CEDEX
- France
5
UEVE -
Université d'Évry-Val-d'Essonne
( 300306 )
- Boulevard François Mitterrand 91025 Evry Cedex
- France
6
LITEM -
Laboratoire en Innovation, Technologies, Economie et Management (EA 7363)
( 1042298 )
- 9 rue Charles Fourier, 91011 Evry Cedex
- France
7
CREM -
Centre de recherche en économie et management
( 894 )
- 7 place Hoche, BP 86514
35065 RENNES CEDEX
- France
|
Audience |
Internationale
|
Date de publication électronique |
2012-08-09
|
Volume |
45
|
Numéro |
24
|
Page/Identifiant |
3412-3420
|
Nom de la revue |
|
Commentaire |
FNEGE 3, HCERES A, ABS 2
|
Langue du document |
Anglais
|
Date de publication |
2013
|
Comité de lecture |
Oui
|
Vulgarisation |
Non
|
Mots-clés (JEL) |
|
Collaboration/Projet |
|
Domaine(s) |
|
Mots-clés |
it
Islamic finance, Portfolio simulations, Financial crisis
|
DOI | 10.1080/00036846.2012.707776 |
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