Portfolio Investing with Sharia
Modern Portfolio Theory requires diversified investments across all asset categories. Industry practitioners achieve this theoretical requirement by first examining their investible universe, then filtering and sorting securities according to typical constraints (regulatory, professional, ethical, spiritual and other), resulting in a “Buy List” that is subjected to portfolio optimization. Each optimization is done according to investment strategies for unique client profiles. The methodology of this study is identical: Identify the Islamic investible universe, short-list qualifying securities, and then perform portfolio optimization for a hypothetical “typical” Muslim investor. Such Islamic portfolios were constructed in both passive and proxy-dynamic forms, and compared to conventional peers.
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