230 AN INTRODUCTION TO ISLAMIC FINANCE
In the long run, there is clear evidence that the Islamic indices performed
better than their counterparts in the entire and fi rst bull market periods. On
the other hand, the Islamic indices failed to sustain their better performance
over the bear and second bull periods since the counterpart indices achieved
higher returns.
Hassan and Girard (2005) looked at the Dow Islamic indices for the
period of 1992 to 2005 and did not fi nd any noticeable differences in per-
formance between Islamic and non - Islamic indices from January 1996 to
December 2005. The Islamic indices outperformed their conventional coun-
terparts from 1996 to 2000 and underperformed them from 2001 to 2005.
They suggested that the period - specifi c performance of Islamic indices was
likely to be attributable to style differences between the two types of series
because they observed that Islamic indices were growth and small - cap ori-
ented and conventional indices were more value and mid - cap focused. They
also concluded that, overall, similar reward to risk and diversifi cation ben-
efi ts existed for both types of index.
Hassan and Antonios (2006) examined the performance of the Dow
Jones Islamic Index against the Data Stream Global Index and confi rmed
earlier fi ndings that Islamic equity investments are no less profi table than con-
ventional investments given the relatively major differences between Sharpe
and Treynor measures and signifi cant positive Alpha over the positive returns
period. The study also observed a bias of Islamic indices towards technology
stocks, which proved benefi cial during bull markets but affected the perfor-
mance adversely during the bear periods.
Elfakhani, Hassan and Sidani (2007) performed an empirical study of a
sample of 46 Islamic mutual funds to investigate the difference in behavior
of Islamic and conventional mutual funds. The study concluded that the
behavior of Islamic mutual funds does not differ from that of other con-
ventional funds, with some Shari’ah - compliant mutual funds outperform-
ing their benchmarks and others under - performing. The total number of
over - performing funds ranged between 29 funds (63 percent of the sample)
and 11 funds (24 percent), depending on the performance measure used and
the market benchmark. This study made two interesting observations: there
is no statistically signifi cant risk - adjusted abnormal reward or penalty
associated with investing in Shar’iah - compliant mutual funds; and Islamic
funds can be considered by conventional fund managers, since investing in
Shari’ah - compliant funds offers some form of diversifi cation and hedging
benefi ts, especially during periods of economic downturn.
CORPORATE SOCIAL RESPONSIBILITY
Advocates of Islamic fi nance argue that Islamic fi nancial institutions (IFIs)
will follow the principles of Islam in giving high priority to promoting
social welfare and justice. If the goal of IFIs is, as they purport, to recon-
cile the individual pursuit of profi t with the good of society as established