Journal of Islamic Business and Management

Performance of Sharī‘ah Compliant Equity Investments in Comparison with their Conventional Counterparts: Evidence from Pakistan

Sheikh Rafiullah and Dr. Atiq-uz-Zafar
Published online: June 2014
DOI: 10.1111/jibm

This paper investigates the effects of Sharī‘ah screening criteria on the performance of an investment portfolio by employing various absolute and risk-adjusted performance measures and Johansen’s co-integration test on hypothetical investment portfolios, containing equities included in KMI-30, KSE-100, and KSE-All indices, respectively. Empirical results suggest that Sharī‘ah screening criteria do not affect the absolute and the risk-adjusted performance of an Islāmic investment portfolio, compared to its conventional counterparts; furthermore, index prices of the Sharī‘ah compliant equities’ index (KMI-30) are not co-integrated with that of conventional equities’ index (KSE-100), which implies that both of the indices’ prices have been changing independently. Therefore, it is recommended that investment portfolios can better be diversified for their enhanced risk to return performance by adding Sharī‘ah compliant equities into them.


Islāmic Finance; Islāmic Capital Markets; Asset Management; Sharī‘ah Compliant Equity Investments; Risk-Return Performance, Co-integration.