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The role of Islamic asset classes in the diversified portfolios: Mean variance spanning test

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  • Dewandaru, Ginanjar
  • Masih, Rumi
  • Bacha, Obiyathulla Ismath
  • Masih, A. Mansur M.

Abstract

This study investigates both conventional and Islamic investors' problems as to whether the inclusion of Islamic and conventional asset classes may expand the frontier of their respective portfolios. Our sample covers the global U.S. portfolios and Malaysian portfolios with multiple asset classes, as well as the portfolios with a specific asset class in several regions. This study uses the recent mean variance spanning test in multiple regimes, which not only accounts for tail risk but also identifies the source of value added (tangency portfolio or global minimum variance).

Suggested Citation

  • Dewandaru, Ginanjar & Masih, Rumi & Bacha, Obiyathulla Ismath & Masih, A. Mansur M., 2017. "The role of Islamic asset classes in the diversified portfolios: Mean variance spanning test," Emerging Markets Review, Elsevier, vol. 30(C), pages 66-95.
    • Handle: RePEc:eee:ememar:v:30:y:2017:i:c:p:66-95
    DOI: 10.1016/j.ememar.2016.09.002
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    More about this item

    Keywords

    Islamic finance; Asset classes; Mean variance spanning test; Fat tails; Asset allocation;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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