Full length Article
Does the Covid-19 pandemic affect faith-based investments? Evidence from global sectoral indices

https://doi.org/10.1016/j.ribaf.2021.101537Get rights and content

Highlights

  • Shariah sectoral indices earn higher average returns during the Covid-19 period.

  • The volatility of the Shariah indices is less than their counterpart indices.

  • The Covid-19 coefficients is lower for the Shariah than their counterpart indices.

  • The S&P Shariah sectoral indices offer a higher return with low risk.

  • Ethical investments are the best alternatives to all type of investors.

Abstract

In this paper, we aim to investigate the influence of the Covid-19 on the behavior of the S&P 1200 Shariah and non-Shariah sectoral indices over the period from 1st October 2010 to 29th October 2020. We contribute to the global literature by examining the financial impact of the Covid-19 on the Shariah and non-Shariah sectoral indices. We find that the S&P 1200 Shariah Communication, consumer staples, financials, healthcare, industrials, IT, materials, and utility sectors earn higher average returns than their counterpart sectoral indices during the Covid-19 period. The study reports that on average, the volatility of the Shariah indices is less than their counterpart indices. Moreover, we further document that on average the S&P Shariah sectoral indices offer a higher return with low risk even during the Covid-19 global pandemic. We suggest that ethical investments are the best alternatives to retail, institutional, and foreign investors.

Graphical abstract

Mean Returns of the S& P 1200 Shariah and Non-Shariah sectoral indices.

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JEL classifications

G01
G11
G12
G17

Keywords

Shariah
Investment
Stock markets
Covid-19
Asset pricing
GARCH

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