On Sharia'a-Compliance and Return to Investment
Lukman Arbi, Suren Basov* and M. Ishaq Bhatti
Department of Finance, La Trobe University, Australia
- *Corresponding Author:
- Suren Basov
Department of Finance, La Trobe University
Bundoora, Victoria 3086, Australia
E-mail: [email protected]
Received Date: December 04, 2013; Accepted Date: December 30, 2013; Published Date: January 01, 2014
Citation: Arbi L, Basov S, Bhatti MI (2014) On Sharia’a-Compliance and Return to Investment. J Stock Forex Trad 3: 116. doi: 10.4172/2168-9458.1000116
Copyright: © 2014 Arbi L, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
In this paper we study the role of contract limitations on the performance of Islamic banks, in contrast to the role of asset limitations, invoked by Derigs and Marzban  to explain why Sharia’a-compliant strategies result in much lower portfolio performance than do the conventional strategies. Their results were, however, challenged in recent empirical paper by Walkshäusl and Lobe , who argued asset limitation even sometimes, is beneficial. The reason may be that they prevent excessive risk taking by the managers. Contract limitations provide a more nuanced explanation of performance of Islamic banks, and can explain why Islamic indexes seem to underperform in emergent, rather than developed markets, as documented by Walkshäusl and Lobe.