Question

Compare the performance and the volatility of the Dow Jones Islamic Index with that of other major conventional indices during the 2008 crisis. What do you think the reasons are for the differences (if any) between these indices? Are there any pure non-Shariah compliant indices we can use for the comparison? Use available literature as needed.

Answer 1

The Dow Jones and Morgan Stanley Islamic records utilized in the investigation have been being determined since 2004. Computations of traditional records are dated much more established. In this manner, list information are viewed as satisfactory to look at 2008 pre-emergency, emergency and post-emergency periods. The Islamic and customary files were determined dependent on month to month rate changes for every period in a manner that would permit execution correlation. Four investigation periods comprising of all periods 20052014 pre-emergency period (2005-2007), emergency penod 2010 -2014 were made. The information utilized in the examination were gathered from the S&P Dow Jones Index and MSCI database,

In the examination of Islamic and customary record exhibitions, the presence of any noteworthy contrast in advertise files during pre-emergency, emergency and post-emergency periods has been tried with a free examples t-Test. In the examination, causal connection between lists has likewise been researched.

The causal connection among Islamic and ordinary market lists has been analyzed with Hatemi (2012) hilter kilter causality test. As indicated by Hatemi-J (2012), the presence of hilter kilter data in money related markets ought to be thought about while investigating the causal relationship in the arrangement. The explanation is that the effect of negative stuns which happen in the arrangement is progressively unmistakable comparative with positive stuns. Propelled by Granger and Yoon's (2002) study, Hatemi-J (2012) isolated the arrangement into positive and negative stuns and researched the causality between the stuns. In light of the issues of non-ordinary conveyance of arrangement and heteroscedasticity, basic qualities have been gathered with the bootstrap reproduction strategy.

Causal connection between the arrangement can change in a particular timespan because of auxiliary changes experienced because of monetary and social turn of events. While in a particular timeframe there are no causal connections between two arrangement, a causal relationship can be seen at the degrees of subsample (Balcilar and Ozdemir, 2013; Inglesi-Lotz et al. 2014). Consequently, the examination of causality in moving windows has occurred in two phases. In the principal stage, a fitting window size has been resolved

In the investigation, a two-phase examination has been directed so as to analyze the Islamic and traditional market files and inspect the causal connection between them.

By utilizing the list information for the pre-emergency, emergency, post-emergency and all periods, the presence of a huge contrast among Islamic and traditional lists has been tried with a free examples t-Test. The aftereffects of the investigation have been summed up in Table 1. As indicated by this, it has been seen that there is certifiably not a measurably critical distinction between the midpoints of regular and Islamic files.

*For all periods, we have watched a high connection between's the Islamic and traditional records with a centrality level of 0.05. In any case, it has been discovered that there is definitely not a factually noteworthy distinction among Islamic and customary list midpoints

# With the expanding ubiquity of the Islamic files, interest for speculation instruments in consistence with Islamic principles has expanded and inside this degree, Islamic market files have begun to be determined in various nations notwithstanding the regular list estimation. In this examination, a correlation of Islamic lists made for Turkey and customary files has occurred. Toward the finish of the examination, it has been discovered that there is anything but a factually huge distinction between the Dow Jones and Morgan Stanley Islamic and customary market records in pre-and post-2008 emergency periods. Conversion scale instability is seen as noteworthy for both ordinary and Islamic lists.

Firstly, various index construction methods are compared. Secondly, this paper describes in detail the process of index construction and finally, the new indices are tested using out-of-sample forecast and trading strategies.