MOMENTUM STRATEGIES OF CONVENTIONAL AND ISLAMIC FINANCE
DOI:
https://doi.org/10.33736/ijbs.14466.2026Keywords:
Investment decisions, Islamic Finance, Momentum factor, EGARCH-MAbstract
The foremost motivation of this study is to explore and compare the behavioral implications of momentum strategies on stock portfolios of conventional and faith-based Islamic finance. The principal asset pricing model is Carhart’s four-factor model, accompanied by the CAPM and Fama & French three-factor models as a comparison base. The two broad categories of conventional and Islamic finance have been segregated into four comparable subgroups: Conventional vs. Islamic banks, Investment banks vs Modarabahs, Insurance vs. leasing, and Mutual funds vs. Islamic mutual funds. The descriptive features have identified the presence of momentum profits in both conventional and Islamic stock portfolios. However, Islamic stocks yielded higher returns than conventional compeers. Similar trends are observed by applying Carhart’s four-factor model as well. A significant pre-recession momentum effect in mutual funds and modarabahs is overturned in the post-recession period. The time-variant volatility is modeled through the EGARCH-M based framework and has depicted sensitivity of returns θ due to omitted risk factors ht. Further, Islamic stock portfolios are better shock absorbent and have greater receptivity to leverage effect than conventional peers.
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