Title: Jakarta Sharia Stock Index and international Sharia leading stock indices: comparison of Sharia screening processes

Authors: Dwiraptono Agus Harjito; Athaya Reisya Nabila; Zuraidah Mohd Sanusi

Addresses: Management Department, Faculty of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia ' Management Department, Faculty of Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia ' Accounting Research Institute, Universiti Teknologi MARA, Shah Alam Branch, 40450 Selangor, Malaysia

Abstract: This research examines whether Jakarta Islamic Index (JII) adopts a financial screening process that can be considered more liberal than the financial screening process applied by Dow Jones Islamic Market (DJIM), S&P 500 Sharia, FTSE Sharia Global Equity Index, AMIRI Capital and MSCI Islamic Index. In this study, 180 Sharia-compliant firms listed in JII from 2010 to 2015 are screened using the formula of liquidity ratio, interest ratio and debt ratio adopted by the selected Sharia index providers. This finding shows that the highest percentage originates from MSCI in which 43 companies are considered to be Sharia-compliant. Meanwhile, only three companies are deemed to be Sharia-compliant according to DJIM and S&P. Given the fact that only less than 50% of firms passed, the screening process under each selected Sharia stock index, it can be concluded that JII applies more liberal financial screening criteria when compared to the other index providers.

Keywords: Sharia-compliant stock; financial screening; quantitative screening.

DOI: 10.1504/IJBEM.2021.114404

International Journal of Business and Emerging Markets, 2021 Vol.13 No.2, pp.107 - 123

Received: 29 Sep 2019
Accepted: 01 Mar 2020
Published online: 20 Apr 2021 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article