In the wake of the global financial crisis of September 2008, Islamic financial products were thrust into the spotlight as alternatives to the shaken conventional equity markets. To examine the resilience of Islamic equities indexes, we compare the performance of the Dow Jones Islamic Market Index (DJIMI) against the Wilshire 5000 (W5000), FTSE All Share Index (ASX), and Shanghi Stock Exchange Composite Index (SSECI) between 2008 and 2011. We found the DJIMI had lower levels of volatility relative to the W5000, ASX and the SSE. The DJIMI annual returns were less than the W5000 but comparable to those of the ASX and SSE. Although these equity indexes are highly correlated, our cointegration analysis revealded no the long-term relationships between the DJIMI and its international counterparts. Although the DJIMI is comprised of equity shares from over 50 countries, our Granger causality results suggest that the DJIMI is the least susceptible the global contagion effects.
Daniel Barkley, Ph.D. ,Executive Director Zubair Akbar, Research Fellow