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Does low leverage minimise the impact of financial shocks? New optimisation strategies using Islamic stock screening for European portfolios

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dc.contributor.authorAbdelKader Ouatik El Alaoui
dc.contributor.authorAbul Mansur Mohammed Masih
dc.contributor.authorMehmet Asutay
dc.contributor.authorObiyathulla Ismath Bacha
dc.date.accessioned2019-02-06T14:12:26Z
dc.date.available2019-02-06T14:12:26Z
dc.date.issued2018
dc.description.abstractThis study embodies a preliminary endeavour at analysing the impact of leverage on portfolio behaviour, with specific reference to return and volatility, in the European stock markets, using the debt ratio as one of the important benchmarks for Islamic stock screening. Given the focus of Islamic stock screening on the debt ratio, we use data from 320 firms for eight European countries which were classified according to their level of debt and size. For this, the portfolio optimisation based Mean-Variance Efficient Frontier (MVEF), the Sharpe Ratio and the Capital Market Line (CML) were employed. Our findings tend to demonstrate that, under shocks, high leverage worsens the portfolio return, volatility, and value at risk. The results further point out that optimal portfolio composition is obtained through a high proportion of low debt funds in the case of two separate equity funds, of low debt and high debt portfolios respectively. The systematic risk of several portfolio strategies is further explored with regards to a benchmark of European index and market-wide, return and volatility shocks.en_US
dc.identifier.citationEl Alaoui, A. O., Bacha, O. I., Mohammed Masih, A. M., & Asutay, M. (2018). Does low leverage minimise the impact of financial shocks? New optimisation strategies using Islamic stock screening for European portfolios. Journal of International Financial Markets, Institutions & Money, 57, 160-184. https://doi.org/10.1016/j.intfin.2018.07.007en_US
dc.identifier.doihttps://doi.org/10.1016/j.intfin.2018.07.007
dc.identifier.issn1042-4431
dc.identifier.urihttps://ikr.inceif.org/handle/INCEIF/3043
dc.languageEnglish
dc.language.isoengen_US
dc.publisherElsevier B.V.en_US
dc.rights2018. Elsevier B.V.
dc.sourceSEDONA
dc.subjectReturnen_US
dc.subjectVolatilityen_US
dc.subjectPortfolio leverageen_US
dc.subjectEuropean stock marketen_US
dc.subjectMean variance efficient frontieren_US
dc.subjectIslamic stock screeningen_US
dc.titleDoes low leverage minimise the impact of financial shocks? New optimisation strategies using Islamic stock screening for European portfoliosen_US
dc.typeJournal Articleen_US
dlc.maintopicIslamic capital marketsen_US
dspace.entity.typePublication
ikr.doctypeScholarly Works
ikr.topic.maintopicIslamic capital marketsen_US
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