Islamic finance belongs to the broader group of socially responsible investments and requires compliance with Islamic law. Most importantly, interest (riba) is not allowed under Islamic law. As such, Islamic stock indices apply business activity and financial ratio screens to a universe of stocks and exclude stocks of firms that have large exposure to interest through debt or cash holdings, as well as firms in certain business sectors (e.g. alcohol, gambling, weapons, and conventional banks). Islamic bonds are based on financial arrangements such as profit‐and‐loss sharing (e.g. partnership) or leasing principles to avoid explicit interest. The Islamic financial sector is expanding globally at over 10% per annum, and according to the Islamic Finance Development Report 2018 Australia was among three countries that saw the most rapid growth in Islamic finance assets in 2017.

This seminar will present findings on the impact of the global financial crisis (GFC) on Islamic financial assets relative to conventional assets. We find that Islamic stocks are relatively more stable during the GFC in a sample of 11 Islamic and 8 non-Islamic countries because Islamic institutions are prohibited from holding sub-prime mortgage securities and derivatives. This result applies particularly to the early stage of the crisis and to Islamic stocks in the UK and the USA. Further, this seminar will discuss initial findings from extending the above analysis to additional financial crises and to periods of financial distress since 1996. The seminar will conclude with a reflection on the relevance of the findings beyond Islamic finance.

BIO:

Maria is an Applied Economist at the ANU Centre for Social Research and Methods (CSRM). She holds a PhD in Finance from University of Sydney and her research background is in Islamic Finance, financial crises and volatility. Before joining CSRM Maria taught economics and econometrics at the ANU Research School of Economics and contributed to a range of research projects in the areas of finance and economics at a number of universities including the Australian National University, University of Sydney and University of Queensland.