Faith‐based versus value‐based finance: Is there any portfolio diversification benefit between responsible and Islamic finance?

AbstractThe existing literature on the return to wine is mixed. Some studies have found wine to be an unattractive investment option and others have found wine to be an investment class that provides excess risk adjusted returns. However, provided the return to wine does not have a strong positive correlation with standard financial assets, even if the return to wine is low, it is possible that including wine in an investment portfolio will provide a diversification benefit. Here the repeat sales regression methodology is used to estimate the return to Australian wine, and the return is shown to be lower than for standard financial assets. Several measures are then used to show that despite the return to Australian wine being lower than the return to standard financial assets, wine does provide a modest diversification benefit. (JEL Classification: G11, G12)

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Performance analysis of investing in Chinese oil paintings based on a hedonic regression model of price index

China Finance Review International ◽

10.1108/cfri-03-2016-0009 ◽

2017 ◽

Vol 7 (3) ◽

pp. 323-342

Author(s):

Fang Wang ◽

Xu Zheng

Keyword(s):

Regression Model ◽

Price Index ◽

Portfolio Diversification ◽

Hedonic Regression ◽

Oil Painting ◽

Content Type ◽

Oil Paintings ◽

Auction Houses ◽

Capm Model ◽

Diversification Benefit

Purpose The purpose of this paper is to construct a price index for Chinese oil paintings and analyze the financial performance of investing in Chinese oil paintings and its potential for portfolio diversification in Chinese financial markets. Design/methodology/approach A hedonic regression model is applied to construct a semiannual price index for Chinese oil paintings from 2000 to 2014. The CAPM model, downside β and standard portfolio optimization are used for analyzing portfolio diversification. Findings The hedonic regression shows that the majority of hedonic variables, such as dimension, artist’s reputation, living status, medium and auction houses, are statistically significant in estimation. Not only the return from oil painting investments is higher than other equities, but also the β coefficient of the CAPM model and downside β indicate that Chinese oil painting may be a good hedging instrument against stock market risk. Furthermore, the portfolio optimizations under standard assumptions suggest that oil paintings as an alternative investment provide diversification benefit. Originality/value This paper provides a new and comprehensive analysis of characteristics and risks of investing in the Chinese oil paintings.

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Fintech and Shariah Principles in Smart Contracts

FinTech as a Disruptive Technology for Financial Institutions - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-5225-7805-5.ch009 ◽

2019 ◽

pp. 207-220 ◽

Cited By ~ 5

Author(s):

Norafni Farlina Rahim ◽

Mohammed Hariri Bakri ◽

Siti Norbaya Yahaya

Keyword(s):

Early Stage ◽

Emerging Technology ◽

Islamic Finance ◽

Disruptive Technology ◽

Smart Contracts ◽

Financial Transaction ◽

Finance Industry ◽

Faith Based ◽

Smart Contract ◽

Financial Technology

FinTech, or financial technology, is an emerging technology in financial transaction. It is disruptive technology which is changing the banking behavior for stakeholders. The thriving emergence of FinTech not only affects the conventional finance industry but also Islamic finance industry, as Islamic finance sector is also embracing FinTech as part of financial revolution. Thus, the Islamic FinTech emerges as faith-based FinTech. This is because Islamic FinTech claimed to comply with Shariah principle in their mechanism and smart contract. There is limited discussion on smart contract and Islamic FinTech and its Shariah principles. Hence, the Shariah principle in smart contract of Islamic FinTech need to be addressed. This chapter tries to delve into the smart contract concept in Islamic FinTech and Shariah principles in the mechanism. The review found that smart contract is currently in the early stage and so is Islamic FinTech. The scholars agreed that FinTech is a Maslahah (interest) to mankind's benefit. However, the smart contract is still in discussion and review.

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Ethical Dimensions in Islamic Finance: The Way Forward

ICR Journal ◽

10.52282/icr.v4i1.499 ◽

2013 ◽

Vol 4 (1) ◽

pp. 141-142

Author(s):

Abdul Hamid Mohamad

Keyword(s):

Financial Crisis ◽

Islamic Finance ◽

The West ◽

Faith Based ◽

The Way

At a seminar organised by the Securities Commission about two years ago on the financial crisis in the West, I asked a professor from Australia whether the crisis was a result of the system itself, or of the abuse of the system. He replied, “Abuse.” Then I said, “Well, if it is abuse, then abuse may also happen in the Islamic system.” He agreed, but argued that there was a difference because the Islamic system is faith-based.

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A Note on the Benefits of Aggregate Evaluation of Budget Proposals

Journal of Management Accounting Research ◽

10.2308/jmar-50559 ◽

2013 ◽

Vol 26 (1) ◽

pp. 145-164 ◽

Cited By ~ 3

Author(s):

Steven T. Schwartz ◽

Austin Sudbury ◽

Richard A. Young

Keyword(s):

Potential Benefit ◽

Management Control ◽

Comparative Statics ◽

Portfolio Diversification ◽

Control Problems ◽

Ex Ante ◽

Low Levels ◽

Individual Evaluation ◽

The Individual ◽

Diversification Benefit

ABSTRACT Budgeting admits significant management control problems due to information asymmetries within organizations. We extend the Antle, Bogetoft and Stark (1999) principal agent analysis of budgeting, performing comparative statics on the potential benefit of bundling projects. Bundling projects confers a type of diversification benefit similar to portfolio diversification. We find this benefit is maximized at intermediate levels of profitability. The rationale for this finding is that at high levels of profitability the control problem is trivial and at low levels of profitability individual evaluation is necessary to screen for only the most profitable projects. For similar reasons bundling is most beneficial at intermediate levels of slack potential. We further find that when bundling is strictly beneficial to the principal its benefit is decreasing in the correlation between the projects' profitability. The intuition for this finding is (positive) correlation diminishes the diversification benefit found with aggregation. Finally, we sketch a setting with heterogeneous projects that differ with respect to ex ante profitability. We demonstrate that the benefit of aggregation is decreasing in project heterogeneity. The intuition is that when projects are sufficiently heterogeneous the ability to tailor the contracts to the individual projects dominates the diversification benefits.

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‘Cash Waqf’ and Islamic Microfinance: Untapped Economic Opportunities

ICR Journal ◽

10.52282/icr.v1i2.751 ◽

2009 ◽

Vol 1 (2) ◽

pp. 337-354

Author(s):

Norma Md Saad ◽

Azizah Anuar

Keyword(s):

Commercial Banks ◽

Islamic Finance ◽

Microfinance Institutions ◽

Faith Based ◽

The Poor ◽

Personal Consumption ◽

Income Generating Activities ◽

Islamic Microfinance ◽

The Needy ◽

Real Target

The success of microfinance programmes in alleviating poverty in many countries has spurred the development of faith-based microfinance institutions. Muslims have combined certain elements in Islamic finance and microfinance to create a new programme called ‘Islamic microfinance’ and use it as a tool to fight poverty in their community. Even though microfinance is proven successful in fighting poverty, current microfinance practised by commercial banks in Malaysia has several shortcomings. Current weaknesses include stringent credit evaluation and missing the real target group, i.e., the poor and the needy. Furthermore, the mode of financing is mostly personal loan using bay’ al-‘inah, whereby the use of the loan is to fulfil personal consumption instead of income-generating activities. Given these shortcomings, the article explores the possibility of using ‘cash waqf’ as a new source of funding for Islamic microfinance and proposes a new concept and application of Islamic microfinance so that it is truly in line with the Islamic spirit of microfinance. It is hoped that with this new concept and application of Islamic microfinance, the use of microfinance genuinely caters for the needs of the poor as well as generating socio-economic growth of the Muslim ummah.

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