{"title":"Quantitative framework for shariah-compliant multi-period fuzzy portfolio optimization: a sustainable approach to ethical investing","authors":"Moad El Kharrim","doi":"10.1108/jiabr-02-2024-0052","DOIUrl":null,"url":null,"abstract":"<h3>Purpose</h3>\n<p>This paper aims to propose a Shariah-compliant multi-period fuzzy portfolio optimization model that accounts for Shariah compliance through purification processes and incorporates various Shariah constraints, including sustainability constraints. This model aims to ensure both ethical alignment and robust portfolio management while navigating modern financial complexities and fostering responsible and sustainable investment practices.</p><!--/ Abstract__block -->\n<h3>Design/methodology/approach</h3>\n<p>The methodology involves a dynamic programming method to solve the proposed program, with returns of the assets assumed to be trapezoidal fuzzy variables. This approach allows for the quantification of portfolio return and risk by the possibilistic mean and semivariance of the fuzzy returns, respectively. A numerical study based on real stock market data tests the efficiency of the proposed algorithm.</p><!--/ Abstract__block -->\n<h3>Findings</h3>\n<p>The research showcases the model’s effectiveness in managing Shariah-compliant portfolios under financial uncertainties and supports the importance of incorporating ethical and sustainability constraints in investment decisions. It highlights the capability of the proposed model to offer a structured approach to ethical investing within the Islamic finance framework.</p><!--/ Abstract__block -->\n<h3>Research limitations/implications</h3>\n<p>While the paper provides a solid foundation for Shariah-compliant portfolio optimization, it acknowledges the complexity and computational demands of the model. Future research could explore simplifying the model without compromising its ethical and Shariah-compliant principles.</p><!--/ Abstract__block -->\n<h3>Originality/value</h3>\n<p>This work introduces a novel integration of Shariah compliance with fuzzy portfolio optimization techniques, addressing the need for dynamic, ethical investment strategies in Islamic finance. The incorporation of purification processes and sustainability constraints into a fuzzy portfolio optimization model represents a unique contribution to the field.</p><!--/ Abstract__block -->","PeriodicalId":46046,"journal":{"name":"Journal of Islamic Accounting and Business Research","volume":null,"pages":null},"PeriodicalIF":2.5000,"publicationDate":"2024-07-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Islamic Accounting and Business Research","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/jiabr-02-2024-0052","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Purpose
This paper aims to propose a Shariah-compliant multi-period fuzzy portfolio optimization model that accounts for Shariah compliance through purification processes and incorporates various Shariah constraints, including sustainability constraints. This model aims to ensure both ethical alignment and robust portfolio management while navigating modern financial complexities and fostering responsible and sustainable investment practices.
Design/methodology/approach
The methodology involves a dynamic programming method to solve the proposed program, with returns of the assets assumed to be trapezoidal fuzzy variables. This approach allows for the quantification of portfolio return and risk by the possibilistic mean and semivariance of the fuzzy returns, respectively. A numerical study based on real stock market data tests the efficiency of the proposed algorithm.
Findings
The research showcases the model’s effectiveness in managing Shariah-compliant portfolios under financial uncertainties and supports the importance of incorporating ethical and sustainability constraints in investment decisions. It highlights the capability of the proposed model to offer a structured approach to ethical investing within the Islamic finance framework.
Research limitations/implications
While the paper provides a solid foundation for Shariah-compliant portfolio optimization, it acknowledges the complexity and computational demands of the model. Future research could explore simplifying the model without compromising its ethical and Shariah-compliant principles.
Originality/value
This work introduces a novel integration of Shariah compliance with fuzzy portfolio optimization techniques, addressing the need for dynamic, ethical investment strategies in Islamic finance. The incorporation of purification processes and sustainability constraints into a fuzzy portfolio optimization model represents a unique contribution to the field.
期刊介绍：
The journal provides a dynamic forum for the advancement of accounting and business knowledge based on Shari’ah and Islamic activities that have an impact on the welfare of society. JIABR publishes articles on the interplay between Islamic business ethics, accounting, auditing and governance, in promoting accountability, socio-economic justice (adl) and everlasting success (al-falah). It seeks to inform, among others, current theoretical and empirical research and practice in Islamic accounting, auditing and corporate governance, management of Islamic organizations, accounting regulation and policy for Islamic institutions, Shari’ah auditing and corporate governance, financial and non-financial performance measurement and disclosure in Islamic institutions and organizations. All styles of research, theoretical and empirical, case studies, practice-based papers and research notes that are well written and falling within the journal''s scope, are generally welcomed by the journal. Scope/Coverage Development of accounting, auditing and corporate governance concepts based on Shari’ah Socio-political influence on accounting and auditing regulation and policy making for Islamic financial institutions and organizations Historical perspectives on Islamic accounting, auditing and financial management Critical analysis on issues and challenges on accounting disclosure and measurement, Shari’ah audit and corporate governance Controls and risks in Islamic organizations Financial and non-financial performance measurement and disclosure.
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