Examining the Performance of Islamic and Conventional Stock Indices: A Comparative Analysis

Islamic indices encompass different fundamental principles to those held by conventional ones, which directs attention onto comparative financial performance. This paper offers a comprehensive performance comparison between Islamic indices and conventional indices, based on four main markets: worldwide, the US, Europe, and Asia-Pacific for the period of 2007 and 2017 through financial ratio comparison and also the CAPM-EGARCH model. The main finding shows that Islamic indices yield higher average returns and lower risks during the 2007-2009 and 2013-2017 periods for all four markets, compared with respective conventional markets. During 2009-2013 period, the comparison proves inconclusive, since Islamic indices demonstrate better performance in European and Asia-Pacific markets, while conventional indices operate at an enhanced level within other markets. Overall, Islamic indices outperformed conventional indices during the global financial crisis period (2007-2009) and the latter post-crisis phase (2013-2017), especially in the European and Asia-Pacific markets