A Comparative Study between Islamic and Conventional Exchange-Traded Funds: Evidence from Global Market Indices

Yap, Kok Leong and Lau, Wee Yeap and Ismail, Izlin (2021) A Comparative Study between Islamic and Conventional Exchange-Traded Funds: Evidence from Global Market Indices. Journal of Asian Finance, Economics and Business, 8 (2). pp. 725-735. ISSN 2288-4637, DOI https://doi.org/10.13106/jafeb.2021.vol8.no2.0725.

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Official URL: http://koreascience.or.kr/article/JAKO202104142239...


This study investigates whether the Islamic Exchange-Traded Funds (ETFs) provide significant benefit to investors relative to conventional ETFs. Six pairs of Islamic and conventional ETFs with 10-year daily price data from 2010 to 2019 have been selected from major market indices like MSCI World Index, MSCI Emerging Markets, MyETF Dow Jones Islamic Market Malaysia, MSCI South East Asia and Wahed FTSE Shariah USA Index for this study. For ETFs that are launched after 2010, the price data from launch date to 2019 are used. Our results show: First, Islamic ETFs are more likely to trade at a premium rather than at a discount, implying the investors are willing to pay a premium. Second, it is also found that Islamic ETFs have a relatively shorter period of price deviation from the benchmark, implying more price stability. Third, conventional ETFs have higher return and lower tracking errors relative to Islamic ETFs. These new findings add to the stylized facts of Islamic ETFs in the extant literature for investors, plan sponsors and regulators as to the differences between the ETFs. As policy suggestion, asset management companies can design new investment products to bridge the gap between conventional and Islamic finance. © Copyright: The Author(s) This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (https://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.

Item Type: Article
Uncontrolled Keywords: Islamic Finance; Exchange-Traded Fund; Performance Evaluation; Market Indices
Subjects: B Philosophy. Psychology. Religion > BP Islam. Bahaism. Theosophy, etc
H Social Sciences > HG Finance
Divisions: Faculty of Economics & Administration
Faculty of Business and Economics
Depositing User: Ms. Juhaida Abd Rahim
Date Deposited: 30 Apr 2021 01:56
Last Modified: 30 Apr 2021 01:56
URI: http://eprints.um.edu.my/id/eprint/25909

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