A new paradigm and new strategies for shariah-compliant portfolio optimization : how to practice in Indonesia.

  • Widiyanti M
  • Jusoh M
  • Md Tahir M
 et al. 
  • 14

    Readers

    Mendeley users who have this article in their library.
  • N/A

    Citations

    Citations of this article.

Abstract

In this paper we analyze the effects of different strategies to construct Shariah compatible financial portfolios. The difference between conventional and current Shariah portfolio management is the application of sector screens and financial screens by which the asset universe is reduced. Yet, here different schools of scholars define different screening rules leading to significant differences with respect to compliance, but also with respect to performance. After analyzing this discrepancy we propose several new strategies to apply the inconsistent rule systems and a new paradigm for defining Shariah-compliance. Under this new paradigm compliance is attributed to the portfolio and not to the individual assets of the universe. We report results of an empirical study analyzing the potentials of these strategies and of the paradigm and how to practice in Indonesia. We can show that under the proposed concepts Shariah-compliant portfolios can be realized which have return and risk profiles comparable to the conventional non-constrained portfolios.

Author-supplied keywords

  • Empirical analysis and Finance’s Rule of Indonesia
  • Islamic funds
  • Portfolio models
  • Shariah guidelines

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

There are no full text links

Authors

  • Marlina Widiyanti

  • Mansor Jusoh

  • Md Zyadi Md Tahir

  • Abdul Ghafar Ismail

Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free