Thesis (MBA)--Stellenbosch University, 2014. / This research study critically reviewed the performance of a Shariah-compliant index compared with that of the UK FTSE 100 between 2003 and 2014. Two broad indices were constructed based on business evaluation techniques, one using market capitalisation and the other total assets as a means to value a company. Shariah-compliant equity screening combines a financial ratio screen as well as business activity screening, which excludes a company’s involvement in any unlawful activities in the eyes of Islamic law.
The sample period was further broken into three sub-periods, namely the bull period (2003-2007),
the financial crisis period (2008-2009), and the post-crisis period (2009-2014), reflecting the
various stages of the business cycle.
A comparison of the risk-adjusted returns shows that the Shariah-compliant index, using market
capitalisation as the means for valuing a company, delivers superior returns at lower risk levels
than the FTSE100 over the sample period. Although the Shariah-compliant indices underperform
to the FTSE100 during the bull market period, both of the Shariah compliant indices outperform the
FTSE 100 during the era of the financial crisis. This can be explained by the fact that Shariah
screening excludes companies that are highly leveraged and therefore it remains buffered from an
economic crisis.
In general, this research contends that the application of a faith-based-screen does not have an
adverse effect on returns.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/96216 |
| Date | 12 1900 |
| Creators | Moosagie, Basheer Ahmed |
| Contributors | Asaria, Mohamed Iqbal, Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Format | x, 45 p. |
| Rights | Stellenbosch University |
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