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Is Gold Different for Islamic and Conventional Portfolios? A Sectorial Analysis

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  • El khamlichi, Abdelbari
  • HOANG, Thi Hong Van
  • Wong, Wing-Keung

Abstract

This article investigates the impact of gold in portfolios in distinguishing between Islamic and conventional stocks as well as between risk-averse and risk-seeking investors, while considering sectorial specificities. Using daily data from the Dow Jones indexes and the London gold market over the 2002-2014 period, the results obtained show that the stochastic dominance method is more robust than the mean-risk method to detect the difference between Islamic and conventional portfolios. For most sectors, risk-averters prefer conventional portfolios, while risk-seekers prefer Islamic portfolios. On the other hand, risk-averters prefer portfolios with gold, while risk-seekers prefer portfolios without gold. A robustness check on different sub-periods shows that these results are time-varying following the behavior of gold prices. These findings can provide useful information to investors respecting Sharia and looking for a diversification with commodities such as gold.

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  • El khamlichi, Abdelbari & HOANG, Thi Hong Van & Wong, Wing-Keung, 2017. "Is Gold Different for Islamic and Conventional Portfolios? A Sectorial Analysis," MPRA Paper 76282, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:76282
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    Keywords

    Islamic vs. Conventional stocks; Risk-averse vs. Risk-seeking investors; Gold; Portfolio diversification; Mean-risk; Stochastic dominance.;

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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