Do Islamic and Conventional Indices React Differently to Monetary Policy Surprises?
By: Jacek Karwowski
References
- Adeyemi, I. B., & Tekdoğan, Ö. F. (2024). Understanding the Screening Criteria for Shariah-Compliant Stocks. Adam Akademi Sosyal Bilimler Dergisi, 14(2), 371–395. https://doi.org/10.31679/adamakademi.1415744
- Akhtar, S., Akhtar, F., Jahromi, M., & John, K. (2017). Impact of interest rate surprises on Islamic and conventional stocks and bonds. Journal of International Money and Finance, 79, 218–231. https://doi.org/10.1016/j.jimonfin.2017.09.003
- Albaity, M. S. (2011). Impact of the Monetary Policy Instruments on Islamic Stock Market Index Return. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1973469
- Altavilla, C., Brugnolini, L., Gürkaynak, R. S., Motto, R., & Ragusa, G. (2019). Measuring euro area monetary policy. Journal of Monetary Economics, 108, 162–179. https://doi.org/10.1016/j.jmoneco.2019.08.016
- Anwer, Z., Azmi, W., & Ramadili Mohd, S. M. (2019). How do Islamic equities respond to monetary actions? International Journal of Emerging Markets, 14(4), 503–522. https://doi.org/10.1108/IJOEM-11-2017-0459
- Anwer, Z., Sabit, A., Hassan, M. K., & Paltrinieri, A. (2023). Monetary transmissions mechanism for Islamic capital markets: Evidence from Markov switching dynamic regression approach. International Journal of Islamic and Middle Eastern Finance and Management, 16(3), 448–463. https://doi.org/10.1108/IMEFM-05-2022-0203
- Asutay, M., Wang, Y., & Avdukic, A. (2022). Examining the Performance of Islamic and Conventional Stock Indices: A Comparative Analysis. Asia-Pacific Financial Markets, 29(2), 327–355. https://doi.org/10.1007/s10690-021-09351-7
- Ayub, M. (2007). Understanding Islamic Finance. John Wiley & Sons.
- Bahloul, S., Mroua, M., & Naifar, N. (2017). The impact of macroeconomic and conventional stock market variables on Islamic index returns under regime switching. Borsa Istanbul Review, 17(1), 62–74. https://doi.org/10.1016/j.bir.2016.09.003
- Bernanke, B. S., & Gertler, M. (1995). Inside the Black Box: The Credit Channel of Monetary Policy Transmission. Journal of Economic Perspectives, 9(4), 27–48.
- Bernanke, B. S., & Kuttner, K. N. (2003). What Explains the Stock Market’s Reaction to Federal Reserve Policy? Staff Reports, 174. https://www.newyorkfed.org/research/staff_reports/sr174.html
- Choi, S.-Y., Phiri, A., Teplova, T., & Umar, Z. (2024). Connectedness between (un)conventional monetary policy and islamic and advanced equity markets: A returns and volatility spillover analysis. International Review of Economics & Finance, 91, 348–363. https://doi.org/10.1016/j.iref.2024.01.034
- Cieslak, A., & Schrimpf, A. (2018). NON-MONETARY NEWS IN CENTRAL BANK COMMUNICATION. NBER WORKING PAPER SERIES, 25032. http://www.nber.org/papers/w25032
- Derigs, U., & Marzban, S. (2008). Review and analysis of current Shariah- compliant equity screening practices. International Journal of Islamic and Middle Eastern Finance and Management, 1(4), 285–303. https://doi.org/10.1108/17538390810919600
- FTSE All-World Index (pp. 1–4). (2025). [Factsheet]. FTSE Russell. https://www.lseg.com/en/ftse-russell/indices/global-equity-index-series
- FTSE IdealRatings Islamic Index Series (pp. 1–5). (2025). https://www.lseg.com/en/ftse-russell/indices/idealratings-islamic
- Hasan, Md. B., Mahi, M., Hassan, M. K., & Bhuiyan, A. B. (2021). Impact of COVID-19 pandemic on stock markets: Conventional vs. Islamic indices using wavelet-based multi-timescales analysis. The North American Journal of Economics and Finance, 58, 101504. https://doi.org/10.1016/j.najef.2021.101504
- Hassan, K., Hoque, A., Gasbarro, D., & Wong, W.-K. (2020). Are Islamic stocks immune from financial crises? Evidence from contagion tests. International Review of Economics & Finance, 86, 919–948. https://doi.org/10.1016/j.iref.2020.08.004
- Hassan, K., & Lewis, M. (Eds). (2007). Handbook of Islamic banking. Edward Elgar.
- International Monetary Fund, Bank for International Settlements, & European Central Bank (Eds). (2015). Handbook on securities statistics. International Monetary Fund.
- Jarociński, M., & Karadi, P. (2020). Deconstructing Monetary Policy Surprises—The Role of Information Shocks. American Economic Journal: Macroeconomics, 12(2), 1–43. https://doi.org/10.1257/mac.20180090
- MSCI Index Calculation Methodology. (2025). https://www.msci.com/indexes/index/990100
- MSCI Islamic Index Series Methodology. (2025). MSCI. https://www.msci.com/index/methodology/latest/Islamic
- MSCI World Index. (2026). MSCI. https://www.msci.com/indexes/index/990100
- MSCI World Islamic Index. (2025). https://www.msci.com/indexes/index/136123
- Nakamura, E., & Steinsson, J. (2018). High Frequency Identification of Monetary Non-Neutrality: The Information Effect. NBER WORKING PAPER SERIES, (19260). http://www.nber.org/papers/w19260
- Paltrinieri, A., Floreani, J., Kappen, J. A., Mitchell, M. C., & Chawla, K. (2018). Islamic, socially responsible, and conventional market comovements: Evidence from stock indices. Thunderbird International Business Review, 61(5), 719–733. https://doi.org/10.1002/tie.22027
- Shamsuddin, A. (2014). Are Dow Jones Islamic equity indices exposed to interest rate risk? Economic Modelling, 39, 273–281. https://doi.org/10.1016/j.econmod.2014.03.007
- S&P Global BMI. (2025). S&P Global BMI. https://www.spglobal.com/spdji/en/indices/equity/sp-global-bmi/#overview
- S&P Shariah Indices Methodology. (2026). S&P. https://www.spglobal.com/spdji/en/documents/methodologies/methodology-sp-shariah-indices-detail.pdf
- Trabelsi, L., Bahloul, S., & Mathlouthi, F. (2020). Performance analysis of Islamic and conventional portfolios: The emerging markets case. Borsa Istanbul Review, 20(1), 48–54. https://doi.org/10.1016/j.bir.2019.09.002
- Umar, Z., Shahzad, S. J. H., Ferrer, R., & Jareño, F. (2018). Does Shariah compliance make interest rate sensitivity of Islamic equities lower? An industry level analysis under different market states. Applied Economics, 50(42), 4500–4521. https://doi.org/10.1080/00036846.2018.1458191
- Umar, Z., Yousaf, I., Gubareva, M., & Vo, X. V. (2022). Spillover and risk transmission between the term structure of the US interest rates and Islamic equities. Pacific-Basin Finance Journal, 72, 101712. https://doi.org/10.1016/j.pacfin.2022.101712
- Ziaei, S. M. (2018). US unconventional monetary policy and Islamic equity indices. International Journal of Islamic and Middle Eastern Finance and Management, 11(4), 575–590. https://doi.org/10.1108/IMEFM-11-2017-0299
DOI: https://doi.org/10.2478/jcbtp-2026-0016 | Journal eISSN: 2336-9205
Language: English
Page range: 149 - 178
Submitted on: Jan 6, 2026
Accepted on: Mar 29, 2026
Published on: May 12, 2026
Published by: Central Bank of Montenegro
In partnership with: Paradigm Publishing Services
Publication frequency: 3 issues per year
Related subjects:
© 2026 Jacek Karwowski, published by Central Bank of Montenegro
This work is licensed under the Creative Commons Attribution 4.0 License.