This study aims to comprehensively evaluate the performance of the Shariah-compliant companies and Islamic bank(s) traded in the Borsa Istanbul. First, it presents a portfolio performance analysis of stocks listed in the Borsa Istanbul Sharia Index and then measures the stock performance of Islamic bank(s) traded in the Borsa Istanbul. Through this dual focus, the study provides valuable insights into the market dynamics of Islamic-sensitive investments.
Two data sets were required for the study’s dual aims. The first data set includes the daily returns of all stocks traded between November 2021 and November 2023. Sharia-compliant companies are treated as a portfolio, while others are treated as a separate alternative portfolio, enabling comparative analysis of the performance of these two portfolios. The second data set consists of daily stock returns of all banks from January 2008 to November 2023. A portfolio comprising these banks is created to examine the marginal contribution of each bank to the overall portfolio performance. The total efficiency loss (TEL) model is applied throughout the study to assess portfolio efficiency, providing a comprehensive evaluation of performance relative to a benchmark.
The analyses show that the performance of the portfolio constructed with Sharia-compliant companies is inferior to that of the portfolio of other stocks. Furthermore, the findings suggest a potential mismatch between the preferences of Islamic-sensitive investors and the performance of the Sharia-compliant portfolio. This discrepancy highlights the importance of better aligning financial products with investor preferences, particularly for Shariah-compliant investments. Additionally, the analysis of Islamic bank(s)’ performance underscores the need for a more nuanced understanding of Islamic-sensitive investors’ behavior in portfolio management.
This paper offers a comprehensive analysis of the implications of Islamic finance in the Borsa Istanbul, evaluating the performance of the Sharia-compliant portfolio and Islamic bank(s) using the TEL model. The study extends beyond traditional performance metrics, capturing aggregate value relative to a benchmark and providing new perspectives on how Islamic finance products can be tailored to investor needs. The novel application of the TEL model offers a deeper insight into portfolio performance, particularly in markets with dual banking systems.
