Are Islamic equity indices more volatile than their conventional counterparts? Evidence from GCC S&P index family

Abstract

This study compares the volatility of S&P GCC Composite Shariah index with conventional benchmarks from Gulf Cooperation Council (GCC) countries. The main goal is to provide evidence from a new index family whether investors who invest in Islamic equity are sacrificing performance or not. Orthogonal Generalized Autoregressive Conditional Heteroskedasticity (OGARCH) (1,1), (1,2), (2,1) and (2,2) framework is employed on daily returns data for the period of April 2007 to March 2018. The results show that S&P GCC Composite Shariah Index has similar risk profile as its conventional counterpart the S&P GCC Composite Index and that investors who wish to invest in Islamic securities are not significantly worse off than those who choose non-Islamic securities and will not sacrifice financial performance