Islamic Equity Indices: Insight and Comparison with Conventional Counterparts

The principles of Islamic indices are similar to those of other ethical indices in terms of the screening process; both of them are also characterized by their short histories. So, after Islamic indices were introduced in the late nineties, many financial markets and index providers launched their own Islamic indices for investors looking for investment opportunities without compromising their beliefs. In terms of academic research, many papers have scrutinized this subject, but neither the over performance nor the underperformance of Islamic indices was able to win the researchers’ unanimous backing. The purpose of this paper is to provide an overview of Islamic equity indices. This will be done by a) studying the current status of this category of indices; b) analyzing the screening process and surveying current literature focusing on Islamic indices; and c) graphically comparing the evolution of major global Islamic indices with their benchmarks. Findings of the study suggested that in most of the cases, Islamic indices are moving almost together with their conventional counterpart (except a few cases) over the observation period.