The Impact of Informed Religiosity on Portfolio Formation
Author(s)
Brimble, Mark
Kremmer, Michael
Tahir, Imran
Year published
2010
Metadata
Show full item recordAbstract
The recent uncertainty in the global financial markets has highlighted to financial market participants the importance of investment decision-making. Despite this, there is still comparatively little research on the factors that influence investment decisions. In particular, the issue of religion has had little attention, though it is potentially significant given the strong influence it has over many individuals' values. In this paper we examine the influence of Islam on investor decision-making using an experimental methodology. We find that those of Islamic faith are more likely to avoid investing in equities that ...
View more >The recent uncertainty in the global financial markets has highlighted to financial market participants the importance of investment decision-making. Despite this, there is still comparatively little research on the factors that influence investment decisions. In particular, the issue of religion has had little attention, though it is potentially significant given the strong influence it has over many individuals' values. In this paper we examine the influence of Islam on investor decision-making using an experimental methodology. We find that those of Islamic faith are more likely to avoid investing in equities that are likely to be considered haram. This, however, also leads them to form less diversified, smaller portfolios, when this is not necessary. We also find that they are more risk-averse and likely to select companies that possess lower beta risk. This, we argue, is of interest to many market participants, particularly those in the advisory, portfolio construction and marketing areas.
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View more >The recent uncertainty in the global financial markets has highlighted to financial market participants the importance of investment decision-making. Despite this, there is still comparatively little research on the factors that influence investment decisions. In particular, the issue of religion has had little attention, though it is potentially significant given the strong influence it has over many individuals' values. In this paper we examine the influence of Islam on investor decision-making using an experimental methodology. We find that those of Islamic faith are more likely to avoid investing in equities that are likely to be considered haram. This, however, also leads them to form less diversified, smaller portfolios, when this is not necessary. We also find that they are more risk-averse and likely to select companies that possess lower beta risk. This, we argue, is of interest to many market participants, particularly those in the advisory, portfolio construction and marketing areas.
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Journal Title
Review of Islamic Economics
Volume
14
Issue
1
Publisher URI
Subject
Finance
Applied Economics