FUNDAMENTALS, UNIVERSE CREATION AND APPRAISAL OF MAJOR SHARI’AH- COMPLIANT STOCKS SCREENING METHODOLOGIES

  • Buerhan Saiti
  • Khaliq Ahmad
Keywords: Islamic Finance, Islamic Stock, Shari’ah-screening Methodology

Abstract

This study will examine and review the existing Shariah-compliant
stock screening methodologies and will propose a universal standard
Shari’ah screening methodology. Apart from understanding the
philosophy, definition, components and functions of Islamic stocks, it
is also important to understand the conditions and rules of the
Islamic stock market, as well as the universe creation and stock
selection, screening process, tolerable level of non-permissible
elements, change of Shari’ah-compliant status, purification process,
and periodic and ongoing review of Shari’ah-compliant stocks. In
this paper, we demonstrate the fundamentals and processes of
Shari’ah-compliant stocks and show how world major stock index
providers create the universes for Shari’ah-compliant stocks. Finally,
we examine the similarities and differences of Shari’ah-compliant
stock screening in terms of methodologies. Despite all the
differences and inconsistencies, it is recommended that the relevant
authorities, or index providers, should set a universal standard with
clear guidelines and understanding to be applicable to all.
Eventually, this universal standard will accelerate the commercial
and economic cooperation among Muslim communities around the
world.

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Published
2018-03-29
How to Cite
Saiti, Buerhan, and Khaliq Ahmad. 2018. “FUNDAMENTALS, UNIVERSE CREATION AND APPRAISAL OF MAJOR SHARI’AH- COMPLIANT STOCKS SCREENING METHODOLOGIES”. Al-Shajarah: Journal of the International Institute of Islamic Thought and Civilization (ISTAC), March, 105-38. https://journals.iium.edu.my/shajarah/index.php/shaj/article/view/612.
Section
ARTICLES