The Market Uncertainty of Ethically Compliant Equity: An Integrated Screening Approach

Norhidayah Abu Bakar; Omneya Abdelsalam; Abderrahim Taamouti; Ahmed Elmasry

doi:10.1016/j.intfin.2023.101759

The Market Uncertainty of Ethically Compliant Equity: An Integrated Screening Approach  

Norhidayah Abu Bakar, Omneya Abdelsalam, Abderrahim Taamouti, Ahmed Elmasry

Research Centre for Financial & Corporate Integrity

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Abstract

This study investigates the uncertainty of market returns for ethically-compliant equity using the comprehensive ethical screening methodology. The analysis also compares the effect of different ethical screening stages on firm uncertainty. We develop a comprehensive ethical screening framework that fulfils the intrinsic value of religion and responds to contemporary ethical challenges. Using the comprehensive framework, a set of non-financial companies are screened for their fulfilment of religious and ethical values. The framework is not only focused on basic screening methodologies that are currently used in the industry but will also cover the aspect of environmental, social and governance (ESG) performances, as well as earnings qualities. The analysis reveals that the ethically-compliance firms display lower uncertainty as compared to the non-ethical compliance firms. The level of firm uncertainty is also different between the screening stages, where ethical firms screened using a more intense approach are exposed to lower uncertainty. The results are robust to various estimations and consistent during the 2008 financial crisis.

Original language	English
Article number	101759
Number of pages	24
Journal	Journal of International Financial Markets, Institutions and Money
Volume	86
Early online date	10 Mar 2023
DOIs	https://doi.org/10.1016/j.intfin.2023.101759
Publication status	Published - 1 Jul 2023

Bibliographical note

© 2023, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Copyright © and Moral Rights are retained by the author(s) and/ or other copyright owners. A copy can be downloaded for personal non-commercial research or study, without prior permission or charge. This item cannot be reproduced or quoted extensively from without first obtaining permission in writing from the copyright holder(s). The content must not be changed in any way or sold commercially in any format or medium without the formal permission of the copyright holders.

This document is the author’s post-print version, incorporating any revisions agreed during the peer-review process. Some differences between the published version and this version may remain and you are advised to consult the published version if you wish to cite from it.

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Keywords

ethical screening
ethical-compliance
uncertainty
volatility
returns stability

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10.1016/j.intfin.2023.101759

Elmasry2023AAM Accepted author manuscript, 1.42 MBLicence: CC BY-NC-ND

Cite this

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abstract = "This study investigates the uncertainty of market returns for ethically-compliant equity using the comprehensive ethical screening methodology. The analysis also compares the effect of different ethical screening stages on firm uncertainty. We develop a comprehensive ethical screening framework that fulfils the intrinsic value of religion and responds to contemporary ethical challenges. Using the comprehensive framework, a set of non-financial companies are screened for their fulfilment of religious and ethical values. The framework is not only focused on basic screening methodologies that are currently used in the industry but will also cover the aspect of environmental, social and governance (ESG) performances, as well as earnings qualities. The analysis reveals that the ethically-compliance firms display lower uncertainty as compared to the non-ethical compliance firms. The level of firm uncertainty is also different between the screening stages, where ethical firms screened using a more intense approach are exposed to lower uncertainty. The results are robust to various estimations and consistent during the 2008 financial crisis.",

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The Market Uncertainty of Ethically Compliant Equity: An Integrated Screening Approach

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