Does Islamic Sensitivity Affect Portfolio Performance? A Different Perspective on Islamic Equity Investments


The aim of this study is to compare the performance of the stock portfolio, which consists of stocks that more comply with Islamic rules in terms of financial ratios, with the Participation 50 Index (KAT50). In this direction, two portfolios, market value-weighted and equally weighted, were created with 50 stocks traded on the Borsa Istanbul (BIST) and meeting the criteria in terms of both business activity and financial ratios. The sampling period was determined as July 2014 – October 2021 Capital Asset Pricing Model (CAPM) and risk adjusted performance measurement methods which are Sharpe Ratio, Treynor Ratio, M2 Measurement and Information Ratio were used to evaluate performance. The analysis shows that Portfolio 1 has the lowest systematic risk (β). Portfolio 2 performed better than others according to risk-adjusted performance measurement methods. Performance of Portfolio 1 was lower than both Portfolio 2 and KAT50. The results of the study reveal that an Islamic stock investment based on the principle of low threshold values used in screening can offer a successful risk-return performance.
Keywords: Islamic Finance, Islamic Stock Markets, Portfolio Management, Capital Asset Pricing Model.


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