An Introduction to Islamic Finance: Theory and Practice

234 AN INTRODUCTION TO ISLAMIC FINANCE

Table 11.2 and Figure 11.2 show the results of a comparison of the
performance of the Dow Jones Islamic World Index and the MSCI World
Index. The results are identical to those found in the above comparisons of
the Dow Jones Islamic US Index and the S&P 500. In both cases, the Islamic
and conventional indices had very high correlations.
A similar comparison of the S&P Shari’ah 500 and the S&P 500 reveals
the same trends shown by the Dow Jones Islamic indices. Table 11.3 con-
fi rms that over periods of three and fi ve years, the Islamic index performed

TABLE 11.1 Performance comparison of Dow Jones Islamic US (IMUS) Index and
S&P 500 (SPX), February 2006–February 2011

IMUS 5Y 4Y 3Y 2Y 1Y

Return 0.083% 0.060%  0.006% 0.337% 0.196%

Sigma 2.84% 3.06% 3.38% 2.80% 2.34%

SPX 5Y 4Y 3Y 2Y 1Y

Return 0.023% 0.023%  0.072% 0.319% 0.194%

Sigma 3.04% 3.32% 3.69% 3.07% 2.39%

ER 5Y 4Y 3Y 2Y 1Y

Return 0.060% 0.082% 0.066% 0.018% 0.003%

TE 0.67% 0.70% 0.77% 0.69% 0.36%

IR / Sharpe Ratio 0.09 0.12 0.09 0.03 0.01

Correlations 0.976 0.979 0.980 0.976 0.989

Source: Based on data from Bloomberg

FIGURE 11.1 Cumulative weekly returns of Dow Jones Islamic US index and S&P 500
Source: Based on data from Bloomberg

40.00%

30.00%

20.00%

10.00%

10.00%

30.00%

20.00%

40.00%

50.00%

0.00%

Dec-05Feb-06Apr-06Jun-06Aug-06Oct-06Dec-06Feb-07Apr-07Jun-07Aug-07Oct-07Dec-07Feb-08Apr-08Jun-08Aug-08Oct-08Dec-08Feb-09Apr-09Jun-09Aug-09Oct-09Dec-09Feb-10Apr-10Jun-10Aug-10Oct-10

IMUS

SPX