Performance of the Islamic Market Indexes

Abstract

Islamic finance is a finance which wants to be ethical, it draw her principles from Islamic jurisprudence who judge « prohibited » all illicit activities that affect the health, the population or their properties. Since Islam admits a social aspect, it requires criteria for the type of investment, from where the prohibition of the investments in the armament, pornography, alcohol, tobacco and all forms of speculative financial investment. These sectors are generating strong profitability. Therefore, if we ignore these activities, finance will be equally performant?

The objective of this work is to study the performance of Islamic banks and Islamic industries by establishing a comparison between those above and conventional banks and industries. To conduct our study we began by studying the performance of the best banks in 2004 over 7 years from 2004 to 2010 through the ROE, ROA, the price of human capital, the price of financial capital and the loans to deposits. The result of this first part suggests that Islamic banks are more efficient. In the second part we used the DJ index over a period ranging from 2005 to 2012 and we found that Islamic industries are more performant than conventional ones. We could also infer that, because the socio-political aspects impact the investor opinion about the placement according to sharia, Islamic indices are more volatile than conventional indices.