Dow Jones Islamic Market U.S. Index: Applying Technical Analysis from a Comparative Perspective
International Journal of Middle Eastern Islamic Finance and Management, Vol. 7, No. 3, pp. 395-420, 2014
26 Pages Posted: 29 Apr 2014 Last revised: 30 Mar 2018
Date Written: 2014
Abstract
As part of Islamic finance going Main Street, Dow Jones introduced a number of Islamic indices in 1999. Many studies are now available that explores various aspects of these indices. One area that has not received much attention is applying technical analysis to these indices and exploring if these indices are amenable to the same kind of analysis as applied to conventional indices and whether technical analysis, in contrast with fundamental analysis produces distinct or superior return.
In this paper we apply some basic tools of technical analysis to Dow Jones Islamic Market US Index in comparison with the three major market indices: Dow Jones Industrial Average, S&P 500 Index, and NASDAQ 100 (NDX). For technical analysis we apply moving averages (MAs), MACD and Stochastics as indicators. The paper is written particularly for those with interest in Islamic finance, but not necessarily familiar with TA. This paper thus also explores some Shariah related issues in effectively applying TA.
The comparative analysis shows that the performance based on IMUS can be improved, when TA is applied.
The successful application of the basic TA tools to Islamic index will encourage the practitioners of Islamic finance to research and explore further uses and effectiveness of TA on other Islamic products.
Keywords: Islamic Finance, Technical Analysis, Dow Jones Islamic, Stochastics
JEL Classification: G10
Suggested Citation: Suggested Citation