{"title":"The profitability of trading strategies from sharia-compliant and conventional banks in the GCC: a comparative study","authors":"Hesham I. Almujamed","doi":"10.1108/JOIC-11-2020-0046","DOIUrl":null,"url":null,"abstract":"\nPurpose\nThe purpose of this research was to examine the effectiveness of filter rules and investigate the weak form of the efficient market hypothesis (EMH) on sample shares of shariah-compliant vs. conventional banks listed on the Gulf Cooperation Council (GCC) stock market.\n\n\nDesign/methodology/approach\nNine trading filter strategies with different statistical analyses were used as defined in the literature (Fifield et al., 2005; Almujamed et al., 2018). Daily closing equity prices of a sample of twenty shariah-compliant banks and twenty conventional banks were recorded over the 18-year period ending 31 December 2017.\n\n\nFindings\nShares of shariah-compliant banks in the GCC were not weak-form efficient since trading based on past information was predictable, profitable and outperformed the corresponding naïve buy-and-hold trading strategy. Shares of conventional GCC banks underperformed\n\n\nResearch limitations/implications\nThis paper’s findings should be useful for central banks and capital market authorities in GCC countries for evaluation when considering new regulations or process changes. Limitations include small sample numbers and need for more recent evaluations of accounting disclosure levels. A wider range of data, statistical analyses and other trading strategies is needed. Potential investors (Muslim and non-Muslim), shariah supervisory boards, and preparers of financial statements can benefit from this study.\n\n\nPractical implications\nThe results suggest that selection of trading strategy affects the success of the rule and that mid-sized filters are the best.\n\n\nOriginality/value\nThis is an innovative study comparing performance of shariah-compliant and conventional banks under different filter rules.\n","PeriodicalId":399186,"journal":{"name":"Journal of Investment Compliance","volume":"31 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2021-04-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Investment Compliance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/JOIC-11-2020-0046","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
Purpose
The purpose of this research was to examine the effectiveness of filter rules and investigate the weak form of the efficient market hypothesis (EMH) on sample shares of shariah-compliant vs. conventional banks listed on the Gulf Cooperation Council (GCC) stock market.
Design/methodology/approach
Nine trading filter strategies with different statistical analyses were used as defined in the literature (Fifield et al., 2005; Almujamed et al., 2018). Daily closing equity prices of a sample of twenty shariah-compliant banks and twenty conventional banks were recorded over the 18-year period ending 31 December 2017.
Findings
Shares of shariah-compliant banks in the GCC were not weak-form efficient since trading based on past information was predictable, profitable and outperformed the corresponding naïve buy-and-hold trading strategy. Shares of conventional GCC banks underperformed
Research limitations/implications
This paper’s findings should be useful for central banks and capital market authorities in GCC countries for evaluation when considering new regulations or process changes. Limitations include small sample numbers and need for more recent evaluations of accounting disclosure levels. A wider range of data, statistical analyses and other trading strategies is needed. Potential investors (Muslim and non-Muslim), shariah supervisory boards, and preparers of financial statements can benefit from this study.
Practical implications
The results suggest that selection of trading strategy affects the success of the rule and that mid-sized filters are the best.
Originality/value
This is an innovative study comparing performance of shariah-compliant and conventional banks under different filter rules.
本研究的目的是检验过滤规则的有效性,并研究有效市场假说(EMH)的弱形式对在海湾合作委员会(GCC)股票市场上市的符合伊斯兰教法的银行与传统银行样本股票的影响。设计/方法/方法采用文献中定义的9种不同统计分析的交易过滤策略(Fifield et al., 2005;Almujamed et al., 2018)。在截至2017年12月31日的18年期间,记录了20家符合伊斯兰教法的银行和20家传统银行的每日收盘价。海湾合作委员会中遵守伊斯兰教法的银行的股票并非弱形式有效,因为基于过去信息的交易是可预测的、有利可图的,并且优于相应的naïve买入并持有交易策略。传统的海湾合作委员会银行的股票表现不佳研究的局限性/意义本文的研究结果应该对海湾合作委员会国家的中央银行和资本市场当局在考虑新法规或流程变化时进行评估有用。限制包括样本数量少,需要对会计披露水平进行更近期的评估。需要更广泛的数据、统计分析和其他交易策略。潜在的投资者(穆斯林和非穆斯林)、伊斯兰教法监事会和财务报表编制者可以从这项研究中受益。结果表明,交易策略的选择影响规则的成功,中等规模的过滤器是最好的。原创性/价值这是一项创新研究,比较了符合伊斯兰教法的银行和传统银行在不同过滤规则下的表现。