What’s in it for Me? A Primer on Differences between Islamic and Conventional Finance in Malaysia

IMF Working Papers, June 1, 2012

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What’s in it for Me? A Primer on Differences between Islamic and Conventional Finance in Malaysia

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Bibliographic details

• Authors: Olga Krasicka, Sylwia Nowak
• Published: June 1, 2012
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475504224.001

Overview

• Research question: What attracts conventional investors to Islamic financial instruments?
• Approach: Compare Malaysian Islamic and conventional security prices and their response to macrofinancial factors.
• Primary conclusion: Islamic and conventional bond and equity prices are driven by common factors; Islamic banks, especially in recent years, have responded to economic and financial shocks in the same way as conventional banks, indicating the gap between Islamic and conventional financial practices is shrinking.

Key findings

• Islamic and conventional bond and equity prices are driven by common factors.
• Islamic banks have, especially in recent years, responded to economic and financial shocks in the same way as conventional banks.
• The observed convergence suggests the gap between Islamic and conventional financial practices is shrinking.

Implications for investors

• Conventional investors may find Islamic financial instruments increasingly similar in behavior to conventional instruments due to common driving factors in prices.
• The narrowing response gap between Islamic and conventional banks to macrofinancial shocks reduces differentiation in risk exposure from macrofinancial events.

Subjects and keywords (as listed)

• Subjects: Banking, Bonds, Financial institutions, Financial services, Islamic banking, Islamic finance, Stocks
• Keywords: bank, bank Islam Malaysia Berhard, bond return equation, Bonds, conventional banks, East Asia, equity index, Global, insurance corporation, Islamic banking, Islamic banks, Islamic finance, Malaysia, market share, return on equity, securities commission Malaysia, Stocks, Sukuk, WP

Olga Krasicka and Sylwia Nowak; IMF Working Paper; June 1, 2012; DOI: https://doi.org/10.5089/9781475504224.001

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