Islamic Stock Exchange and assessment of the performance of Islamic Stock Exchange indices

Because of the prohibition of interest in Islam and some tools in traditional finance, Muslims with high Islamic sensibility cannot use their capital in these vehicles. Therefore, Islamic finance system emerged in the 70s. Islamic finance has prohibited all kinds of transactions with interest and uncertainty. Islamic finance is divided into two branches as Islamic banking and Islamic Capital Markets. There are methods of fund raising and fund-raising in accordance with the rules of Islamic banking. Islamic capital markets enable the trading of stocks and financial instruments compatible with Islamic religion. Due to the limited impact of the recent global financial crises on Islamic finance, the general investor group has increased interest in Islamic investment instruments. The reason for this is the fact that interest and uncertainty has lest impact on the Islamic finance. In this study, 6 pairs Islamic and traditional stock exchanges which traded in the USA, India, Turkey, Malaysia, Japan, India are intended to be compared with each other. To evaluate the performance of the indices, the Sharpe ratio, the Treynor ratio and the Jensen Alpha criterion will be used as the performance evaluation criterion. Keywords: Islamic finance, Islamic banking, Islamic capital markets, Sharpe ratio, Treynor ratio, Jensen Alfa criterion