An Empirical Assessment of Islamic Index : A Case Study of India

To meet the mounting demand for Shariah Compliant Investment Avenues in equity markets, hundreds of Islamic Indices have been launched world over. Dow Jones and FTSE Global were the first to launch the Shariah Compliant Index namely DJIMI and FTSE Global Islamic Index Series (GIIS). While a number of Shariah compliant Indices have been launched by different publishers like S&P, MSCI, FTSE, Dow Jones and Russell to meet the growing demand but a very few studies have been conducted to assess the performance of these indices in comparison to their counterpart indices in terms of their risk and return. The present study has been undertaken to assess and compare the performance of S&P BSE 500 Shariah and S&P BSE 500 for five years time period i.e., June 2009 to May 2014. To assess the performance of these indices, average monthly raw returns, risk adjusted monthly returns were calculated using time series data of daily closing prices. An attempt has also been made to analyze the risk involved Beta and Alpha has been used. The study also investigates the long term relationship between Islamic Index and its counterpart. The study has revealed that S&P BSE 500 Shariah Index has slightly underperformed the conventional index during the period under study on the basis of monthly returns. However, the Islamic Index was found to be far less risky than its counterpart Index. Also the two Indices were cointegrated and exhibited long term relationship