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Muslim Attitudes to Investing in Global Stock Markets Research Paper


Executive summary

The main aim of this research study is to analyze the Muslim investor attitudes towards investing in global stock markets and companies. In line with this objective, the paper identifies some variables as explanatory variables. These variables are Sharia-compliant products or financial services, stability in money value, economic development, social development, resource optimization, and equitable distribution of resources. The study relied on primary data using structured questions to explain the main objective.

This research study attempts to explain the various theories related to the Muslim investor attitude. The study used a cross-sectional research design to meet the objectives. The data of the survey were analyzed using statistical techniques such as SPSS, ANOVA, regression, and correlation analysis. The study found out that Islamic security is not alike to the common conventional securities because they have to satisfy various conditions.

It ought to be focused on the states of sharing the profits and losses in a reasonable, plain condition on the legitimate guidelines administering the mudarabah and the partnership contracts fundamentally. In addition, the resources assembled through these securities (issued on no premium premise) ought not to be rechanneled to establishments that do not work in line with Sharia and to firms managing interests for every one of their exercises by utilizing Islamic bank.

Problem statement

Among all the segments of the financial sector, the stock market stands out as the most significant segment. The part played by the stock market in the process of economic growth is more noteworthy as it promotes the flow of funds from the savers to the investors (Baker & Wurgler, 2002). The piece of ownership in a company is ‘the stock’. The holders of the stock have a right to share all the residual income after the fixed income has been claimed. Stocks exist in different kinds. The first one is common stock. This kind of shock is influenced by profit and loss. The second type is the preferred stock.

This kind of stock has a pre-fixed rate that is used to determine and calculate the share from the profits that the company realizes. The third and final one is the loan stock. This kind of stock has a fixed rate of interest that enables it to earn its profits (Banerjee, Heshmati, & Wihlborg, 2004). The stock market is genuinely an important segment of the financial sector. Its role in mobilizing the flow of assets and resources from the savers to the investors contributes directly to the economic growth of a country. The economy of the country will benefit from increased liquidity of the financial markets in the event that the stock market is highly organized.

In reality, The French came up with the idea of the share market. This was way back in the 13th century. The shares of Dutch East India Company were issued in the Amsterdam Stock Exchange, way back in the year 1602. Actually, it was the first company to float its shares (Berglof & Bolton, 2002). Each country has its own place for the stock market.

This is always referred to as the stock exchange and most of the time the stock exchange is situated in the country’s capital city. The role of the stock market in a country normally complements the roles played by the other financial institutions that exist in the country, for instance, the commercial banks, the insurance companies, and so on (Booth, Aivazian, Demirgüç-Kunt, & Maksimovic, 2001). This paper intends to explore the Muslim investor attitudes towards investing in global stock markets and companies.

Literature review

Emergence and impacts of stock markets

The stock exchange plays a wide variety of roles which are considered to be more significant to a country. First and foremost, the stock exchange creates a business sector that can contain several buyers and sellers at the same time. Secondly, the stock market conveys the necessary and viable information that benefits prospective buyers and sellers. Thirdly, the stock market plays the part of a tool that supplies assets and sufficient funds for companies. Finally, the stock market creates a platform for companies and corporations to raise capital for starting up or expanding the business (De Haas & Peeters, 2006).

All these factors considered the stock exchange plays a part in enhancing all the available assets. There are basic attributes that the stock exchange should possess to facilitate its role in economic growth. These attributes are connected to the trading opportunities and contractual dealings which are part and parcel of an organized business sector. In the long run, the economic development of a country owes much to its robust stock exchange market.

The stock market is genuinely an important segment of the financial sector. Its role in mobilizing the flow of assets and resources from the savers to the investors contributes directly to the economic growth of a country. The economy of the country will benefit from increased liquidity of the financial markets in the event that the stock market is highly organized. At the same time, a highly organized stock market makes it possible for market risk diversification as a result of an increased portfolio. The third point is that a highly organized stock market creates many investment opportunities that promote the development of large corporates. The faith of the Muslim community holds that profit comes as a result of hard work. This is contrary to the investment in the stock market that is heavily dominated by interests (Desai, Foley, & Hines, 2004).

Islamic finance and investment

All markets are the same, therefore, the Islamic market is similar to the conventional market in many aspects, most notably, and it has a business sector where transactions occur. There is also a mechanism for setting the prices and also for distributing the commodities (Al-Masri, 2007). There are various ways of operating and managing the Islamic stock market. There are special considerations to ensure that the Sharia laws and principles are implemented between the contracting parties. In the Islamic stock market, the securities or the stock offered is interest-free. There are several financial instruments that can be traded in any stock market. The ordinary shares and risk-bearing certificates are commonly traded in the Islamic stock market. The Islamic stock market is relevant to the economic growth of the country (Giannetti, 2003).

Accordingly, the Islamic stock exchange supplements financial institutions. The Islamic stock market is balanced, comprehensive, and fair because of its dynamic mode of operations (Osmani & Abdullah, 2009). Surely, Islamic distinct options for customary investment instruments have been driven by the way that such devices don’t comply with Islamic principles. For many Islamic nations, the size of their stock markets has been rapidly growing for the past few years. Take, for instance, Malaysia; its capital market has grown by more than triple the size it was in the year 2000.

This is equal to about 260% of the GDP of the country. Islamic equity is composed of about 850 Sharia stock which stands at 86% of the total stock. Among these, about 63.7%is under market capitalization (Korajczyk & Levy, 2003). The contradictory issue and level headed discussions among the present-day researchers is, are the Muslim financial specialists permitted to purchase and offer shares? Unquestionably, there will be sure inconsistencies between the Islamic business sector and the non-Islamic business sector.

The Islamic take on riches

The Islamic states of mind toward riches support the Islamic markets. Islam does not propose that riches have any characteristic moral qualities, whether great or awful. Not at all like some societies and religions, does Islam show that the lack of riches is a benefit or badness, nor that does its availability infer a specific character (Nivorozhkin, 2005). As far as the point of reference, note that the Prophet Muhammad and his accomplices completed business organizations on a fruitful premise.

Muslims are urged to look for financial bounties that God has made accessible to them. They are urged to work as a profession and have been advised to participate with each other. In addition, the demonstration of Fuduli (for instance, when a man accomplishes something to cultivate the enthusiasm of someone else without the latter’s earlier assent) is repaid and promoted. If the Future is not repaid, many fair and suitable intentional acts just will not be performed and, thusly, potential monetary advantages to the general public will be squandered.

Furthermore, Islam likewise endorses a necessary budgetary commitment which is zakah: a money related commitment from the rich to the poor and less fortunate people. Among the numerous reasons for zakah that is depicted in the Quran is so that the riches do not circle just among the rich people. Subsequently, if capital markets are not developing to take into consideration increment in riches and financial development or if the development is lop-sided bringing about a convergence of riches, then it means that some shortcoming which needs revision (Schmukler & Vesperoni, 2001).

Sharia rulings on investment in stock

Out of the total population of the world, the Muslims comprise about one-fifth of the total population. In addition, it is speculated that the total value of assets and resources available to be invested by the Muslims is beyond $800 billion. This figure is only temporary as it increases by a constant rate of 15% every year. Just a little parcel of the accessible assets is re-invested into the Islamic items which are demonstrative that this business sector is generally untapped.

Regardless of the latest financial crisis, inflationary weights, an expansion in the costs of commodities, and far-reaching financial slowdown, the forecasts for development in Islamic securities markets are liable to be positive (Mondal, Akter, & Afsar, 2013). With respect to an underlying exertion towards Sharia abiding securities, an early survey and recognizable proof of Sharia-consistent stocks was done in 1983 by Bank Islam Malaysia Bhd. For this situation, the part of the Sharia Advisory Boards can’t be denied. The selected boards will give certification that the interest in securities exchange is overseen inside the Islamic structure (Al-Masri, 2007).

The Sharia empowers the utilization of benefit sharing and organization schemes and precludes riba (interest), may (betting and other games of chance), and gharar (offering something that is not possessed or that can’t be portrayed in precise details as far as sort, size, and sum). As a rule, the key guideline in Islamic funds is the need to accomplish equity. The point along these lines is to circumvent unfairness to a party in exchange. These incorporate disallowances against jahala (obliviousness) and gharar (guesswork).

Whilst it is recognized that it is difficult to expel all hypothesis or instability from the trade, the aim is that avoidable components of theory ought to be eliminated and parties ought to be sure about the grounds they have consented to work together. These standards imply that betting and numerous sorts of subordinate contracts, numerous types of insurance, unreasonable advantage, and wage from articles that are prohibited for a Muslim are not allowed under Sharia law (Osmani & Abdullah, 2009).

Global stock markets

Fundamentally, stocks can be comprehensively separated into two classes, which are common stock and preferred stock. The organization’s directorate will choose whether or not to pay out a profit (Al-Masri, 2007). Taking into account the above it can be inferred that a common share is allowed in the Sharia; however, a preferred share is not permitted as it is not a trusted business since the shareholders don’t have the privilege to vote. It implies they are not the accomplices of the organization and the additional cash that the preferred shareholders get is much the same as Riba as they take it without sharing the threat of profit and loss (Osmani and Abdullah, 2009). In connection with the Sharia decisions, there is no disallowance in Islam to participate in any venture exercises. Besides, there is by all accounts an accord of sentiment among contemporary Muslim law specialists on the admissibility of trading regular stocks through purchasing and selling transactions. This depends on custom, relating the legitimate proverb “That which is recognized as custom should have the power of that which is specified as a situation”.

In any case, a group of regarded researchers differs from this determination and proposals. They contended that this determination is excessively optimistic and makes it hard for Muslims everywhere. Trading a common share resembles trading a segment of the capital of the organization. Along these lines, it is legitimate as indicated by the majority of the researchers. They contend that a share in one’s own property so he has the privilege to offer or loan if it doesn’t hurt the other shareholders. It doesn’t comprise al-Gharar, as the cost is resolved by the existing business sector during its buy (Osmani & Abdullah, 2009).

On the other hand, short selling is not legitimate in the Sharia as it resembles betting and deceiving the purchaser as the merchant offers the item that he borrows, however, he doesn’t own it. Be that as it may, if the speculator purchases the stock from the broker and subsequently offers it, then it is permitted in the Sharia. Despite the fact that margin trading is not permitted evidently in Islam, as this agreement contains Riba, there is space to make this agreement legitimate through offering credits to the financial specialist without premium or if the merchant concurs on Mudarabah (sharing profits or losses) contract with the speculator (Al-Masri, 2007).

Speculation and the Islamic stock market

Speculation is characterized as the act of purchasing or offering with the intention of then selling and purchasing and in this way making a benefit. The fluctuations in prices normally form the basis for speculation (Osmani and Abdullah, 2009). Many speculators have a belief that when the prices are too bad currently, they can only be too good in the near future. Indeed, speculation is perceived in the present writing as a critical power in the valuing of the current financial markets, however, it is characterized contrastingly by various scholars.

Speculation is a process whereby an investor may purchase the stock now, in order to offer it later for more than he might suspect it is really worth, consequently harvesting capital additions (Hassan, 2010). Speculation is a fake opposite procedure of offering and purchasing not going for physically trading wares (no real ware is coveted for itself). In all actuality, it goes for profiting from regular or counterfeit value and capital additions if the forecasts of value changes in the short-term turned out to be valid (Osmani and Abdullah, 2009).

The speculators are subsequently left to toy with random patterns of stock value developments through the implementation of various “betting” positions. By and large, speculation requires a lot of learning and abilities and in this manner, it can’t be likened with betting. Thus, according to prophetic saying “Islam has entirely reprimanded any planned increase of costs whether through imposing a business model or najash (increasing the costs without really expecting to purchase)” (Hossain, Hossain, & Sadi, 2013). There is a difference between speculation in the Islamic sector and speculation in the conventional market because there are some factors to recognize.

First and foremost, all financial specialists, or an incredible number of them, could be regarded as speculators. They purchase securities on the trust that their costs will climb later on and they will have the capacity to acknowledge capital gains (Osmani and Abdullah, 2009). They would precisely be blamed for gullibility in the event that they don’t do that. Notwithstanding for the individuals who don’t sell when costs climb, they forgo the selling on the trust that the costs will climb much further. Had they realized that costs would fall they would have acted in an unexpected way. This is entirely legal. The target of these speculators is to boost their possessions regardless of the fact that they do not get capital gains. The distinction amongst speculators and different investors is that while the previous purchase and sale in an extremely time the last take more time to do as such (Al-Masri, 2007).

Secondly, it might be proposed that without data, speculation comes extremely close to betting, and the lesser the data accessible the more speculation turns out to be near betting. This might be valid, yet it is not inexorably an issue that is restricted to speculation. The absence of data turns into an issue for all chiefs. Without data, speculation gets to be unverifiable and any choice taken discreetly gets to be unreasonable. In such circumstances, many investors will endure as an aftereffect of the absence of dependable data: national organizers, business visionaries, agents, middlemen (value producers), speculators, and a large group of other chiefs. The issue of the absence of data is not, and ought not to be kept in theory. Speculation is like betting or any other game of coincidence when doing it with only a limited amount of information available. In this way, it is improper to engage in vital the decision-making process. This is just to stress the significance of solid data to speculation as well as to the overall procedure of decision making (Al-Masri, 2007).

The third point is that considering the gharar and speculation, it is true to recognize that when it comes to speculation, all the sides have all the information they require to make the deal. Likewise, the object of the exchange, which is the obtained security, is accessible in the business sector at the season of exchange and will undoubtedly be accessible at the season of delivery. The fourth and final point is that speculation may initiate the business sector. This can enact the business sector. The ramifications of this can be found in connection with the capacity of firms to raise capital (Al-Masri, 2007).

Research objectives

The main aim of this paper was to explore the Muslim attitude towards investing in global stock markets and companies. In line with this objective, the paper identifies some variables as explanatory variables. These variables are Sharia-compliant products or financial services, stability in money value, economic development, social development, resource optimization, and equitable distribution of resources.

Research methods

The methodology is the process of instructing the ways to do the research. It is, therefore, convenient for conducting the research and for analyzing the research questions. The process of methodology insists that much care influences the kinds and nature of procedures to observe in accomplishing a given set of procedures or an objective. The purpose of this research was to explore the Muslim investor attitudes towards investing in the global stock market. The exploratory research study provides researchers an opportunity to assess areas that do not have extensive research (Saunders, Thornhill, & Lewis, 2009). Therefore, engaging in exploratory study contributes to the development of additional knowledge on the issue or phenomenon under investigation.

Quantitative and Qualitative Approach

The quantitative research approach refers to the use of statistical techniques, mathematical methods and calculation techniques to analyze data (Saunders, Thornhill, & Lewis, 2009). The quantitative methodology aims at utilizing mathematical and statistical theories and models to analyze the data. The quantitative method validates the hypotheses and conclusions that stem from the qualitative methodology. The scientific procedures and processes that help in quantitative methodology encompass deriving models and theories; designing instruments for data gathering; controlling the variables empirically, and analyzing data using models.

The qualitative approach is mostly concerned with human motives and the reasons behind such motives (Saunders, Thornhill, & Lewis, 2009). The main questions that come with the qualitative approach are ‘why?’ and ‘how?’ in addition to ‘what?’, ‘where?’ and ‘when?’ Concerning this, a researcher utilizing the qualitative approach will tend to use smaller samples rather than larger samples. The qualitative approach strictly generates only information that applies to the designated case study; any additional information is guessed. Once the hypotheses stem from a qualitative approach, they filter through the quantitative approach.

Research Design

There are three types of research design: exploratory research, descriptive research, and causal research. This study utilized the exploratory research design. The exploratory research design mainly explores the nature of the problem in order to draw inferences. In this scenario, the researcher is in a good position to understand the problem under investigation. The flow of exploratory research involves identifying the problem and seeking to find the appropriate solutions and new ideas. Exploratory research is mostly applicable in circumstances where the structure of the research problem is not definite. The interview is a good example of the methods that help to gather information in this kind of research.

Population and Sampling

There are two popularly used procedures for sampling. The sampling procedures include prospect sampling and non-prospect sampling. In a probability sampling procedure, the samples are representative of the population. This is because all the entries have a chance of selection. On the other hand, items in the non-probability sampling do not have an equal chance. In this scenario, not all the items in the population have equal chances of selection. The data for the study came from the players of the Kuala Lumpur Stock Exchange.

Data Collection and Instrumentation

The adoption of primary sources played a fundamental role in improving the relevance of the research findings. The integrated interviewing technique helped to collect data from the field. Consequently, a set of questionnaires was developed. The questionnaires acted as a guide in conducting the interview. The questionnaires were mainly composed of open-ended questionnaires to provide the respondents an opportunity to answer the required issues based on their opinion. The respondents received the questionnaires directly via online media. Thus, the data collection method entailed an online survey. Adopting this method of administration validates the need to minimize the cost of the study. This is because of the fact that respondents stay sparsely.

Data Analysis and Presentation

The collected data will be analyzed quantitatively. This goal comes by incorporating quantitative data analysis tools such as tabulation, use of graphs, percentages, and charts. Considering the fact that the research study has integrated the qualitative research design, the data analysis and presentation method will entail the adoption of the textual presentation technique. This technique comes about by using statements that comprise numerals. One of the textual presentation tools that are important in analyzing the research data entails the Likert scale. By using this tool, the research will be in a position to evaluate the qualitative data using point scales such as the 5-point Likert scale. In addition to the above technique, the research will integrate the Microsoft Excel data analysis technique. The adoption of this technology played a fundamental role in improving the effectiveness and efficiency with which the collected data will be analyzed using tables, charts, and graphs. Moreover, incorporation of the Microsoft technique played a fundamental role in improving the ease with which the research data translates.

Analysis and findings

Sample characteristics

The sampling procedures include prospect sampling and non-prospect sampling. In a probability sampling procedure, the samples are representative of the population. This is because all the entries have a chance of selection. On the other hand, items in the non-probability sampling do not have an equal chance. In this scenario, not all the items in the population have equal chances of selection. The data for the study came from the players of Kuala Lumpur Stock Exchange (KLSE).

This technique will ensure that there is no bias in conducting the study. The study took into account both males and females in constructing the research sample. The study assumes that the selected research sample will be representative of the workforce perception of the relationship between pay and performance. The choice of these regions has arisen from the need to understand the impact of social and cultural diversity on employee perception and hence performance. In order to understand the demographic information about the participants, the distribution of gender, age, education level, income, and period employed in the organization are in the following sections.

Reliability Analysis

Reliability analysis evaluates whether the multiple instrument items are measuring the same variable or concept. In SPSS, the Cronbach’s Alpha value measures the reliability of the various variables. The minimum requirement for the value of Cronbach’s Alpha is 0.7 to ensure that the items are internally consistent and reliable. In the exploratory study, the Cronbach’s Alpha value of 0.6 is valid. In this study, the various measurement items are from previous studies, thus, the minimum value is set at 0.7. The corrected-item total correlation (CITC) is also included to evaluate the reliability of the individual item. If the CICT is below 0.5, then the item cannot reliably measure the corresponding variable and is invalid for further analysis. The Cronbach’s Alpha if item deleted indicate whether the Cronbach’s Alpha value goes up or down after excluding this item. Thus, if this value is above the Cronbach’s Alpha value of the variable, the item is invalid for further analysis. Table 1 summarizes the results.

Table 1: Reliability Analysis for Variables

Variables Item CITC Cronbach’s Alpha if Item Deleted Cronbach’s Alpha
Stability in money value V1 0.646 0.822 0.836
V2 0.725 0.747
V3 0.725 0.746
Economic development V4 0.611 0.781 0.817
V5 0.738 0.719
V6 0.725 0.727
V7 0.486 0.806
Social development V8 0.577 0.698 0.761
V9 0.577 0.696
V10 0.623 0.644
Resource optimization V11 0.581 0.634 0.739
V12 0.620 0.585
V13 0.594 0.733
Equitable distribution of resources V14 0.770 0.872 0.898
V15 0.780 0.868
V16 0.631 0.801
V17 0.777 0.871
V18 0.800 0.864
Sharia-compliant products or financial services V19 0.709 0.751 0.833
V20 0.675 0.786
V21 0.694 0.767
Muslim attitudes V22 0.723 0.750 0.837
V23 0.691 0.782
V24 0.684 0.789

According to the results, the Cronbach’s alpha value of the stability in money value, economic development, social development, resource optimization, equitable distribution of resources, Sharia-compliant products or financial services, and Muslim attitudes are 0.836, 0.817, 0.761, 0.739, 0.898, 0.833, and 0.837, which are all above the minimum requirement of 0.7. In addition, the CICT for individual items is all above the minimum requirement of 0.5, and the Cronbach’s Alpha, if deleted for individual items, are all below the Cronbach’s Alpha value. These results demonstrate that these items are internally consistent and reliable, and are valid for further analysis.

Correlation analysis

Correlation between stability in money value and Muslim attitudes

There was a scatter plot in order to check the correlation between stability in money value and Muslim attitudes. This was to ensure that there was not a violation of the assumptions of normality, linearity, and homoscedasticity among the data. As seen in Figure 1 below, there is a strong, positive correlation between the variables of stability in money value and Muslim attitudes, and the data is normally distributed.

Scatter plot of stability in money value and Muslim attitudes.
Figure 1: Scatter plot of stability in money value and Muslim attitudes

There was a Pearson product-moment correlation coefficient to analyze the relationship between the stability in money value and customer Muslim attitudes. This was after inspecting a positive correlation between the stability in money value and Muslim attitudes. The correlation value below 0.3 indicates low-level correlation; the correlation value between 0.3 and 0.6 indicates a medium level correlation, while the correlation value above 0.6 indicates a higher-level correlation. There was a medium positive correlation between the stability in money value and Muslim attitudes, with a correlation value of 0.373, which is significant at 0.01 levels, indicating that higher levels of the stability in money value are associated with higher levels of Muslim attitudes.

Table 2: Correlation between stability in money value and Muslim attitudes

Stability in money value Muslim attitudes
Stability in money value Pearson Correlation 1 0.373**
Sig. (2-tailed) 0.000
N 164 164
Muslim attitudes Pearson Correlation 0.373** 1
Sig. (2-tailed) 0.000
N 164 164
**. Correlation is significant at the 0.01 level (2-tailed).

The correlation between economic development and Muslim attitudes

There was a scatter plot to check the correlation between economic development and Muslim attitudes. As seen in Figure 2 below, there is a strong, positive correlation between the variables of economic development and Muslim attitudes, and the data is normally distributed.

Scatter plot of economic development and Muslim attitudes.
Figure 2: Scatter plot of economic development and Muslim attitudes

There was a Pearson product-moment correlation coefficient to analyze the relationship between economic development and customer Muslim attitudes. This was after inspecting a positive correlation between economic development and Muslim attitudes; the results are in table 3 below. As is in Table 3, there was a medium positive correlation between economic development and Muslim attitudes. The correlation value was 0.313, which is significant at the 0.01 level, indicating that higher levels of economic development are associated with higher levels of Muslim attitudes.

Table 3 The correlation between economic development and Muslim attitudes

Muslim attitudes Economic development
Muslim attitudes Pearson Correlation 1 0.413**
Sig. (2-tailed) 0.000
N 164 164
Economic development Pearson Correlation 0.313** 1
Sig. (2-tailed) 0.000
N 164 164
**. Correlation is significant at the 0.01 level (2-tailed).

The correlation between social development and Muslim attitudes

There was a scatter plot to check the correlation between social development and Muslim attitudes. As seen in Figure 3 below, there is a strong, positive correlation between the variables of Social development and Muslim attitudes, and the data are normally distributed.

Scatter plot of social development and Muslim attitudes.
Figure 3: Scatter plot of social development and Muslim attitudes

There was a Pearson product-moment correlation coefficient to analyze the relationship between social development and customer Muslim attitudes. This was after inspecting a positive correlation between a fair wage and Muslim attitudes. The results are shown in Table 4 below. As can be seen from this table, there was a medium positive correlation between social development and Muslim attitudes, with a correlation value of 0.412, which is significant at 0.01 level, indicating that higher levels of social development are associated with higher levels of Muslim attitudes.

Table 4 Correlation between social development and Muslim attitudes

Muslim attitudes Social development
Muslim attitudes Pearson Correlation 1 0.412**
Sig. (2-tailed) 0.000
N 164 164
Social development Pearson Correlation 0.412** 1
Sig. (2-tailed) 0.000
N 164 164
**. Correlation is significant at the 0.01 level (2-tailed).

The correlation between resource optimization and Muslim attitudes

In order to check the correlation between resource optimization and Muslim attitudes, there was a scatter plot. As seen in Figure 4 below, there is a strong, positive correlation between the variables of resource optimization and Muslim attitudes, and the data is normally distributed.

Scatter plot of resource optimization and Muslim attitudes.
Figure 4: Scatter plot of resource optimization and Muslim attitudes

After inspecting a positive correlation between resource optimization and Muslim attitudes, there was a Pearson product-moment correlation coefficient to analyze the relationship between resource optimization and customer Muslim attitudes. The results are in Table 5 below. As can be seen from this table, there was a medium positive correlation between resource optimization and Muslim attitudes, with a correlation value of 0.409, which is significant at 0.01 level, indicating that higher levels of resource optimization are associated with higher levels of Muslim attitudes.

Table 5: Correlation between resource optimization and Muslim attitudes

Muslim attitudes Resource optimization
Muslim attitudes Pearson Correlation 1 0.419**
Sig. (2-tailed) 0.000
N 164 164
Resource optimization Pearson Correlation 0.409** 1
Sig. (2-tailed) 0.000
N 164 164
**. Correlation is significant at the 0.01 level (2-tailed).

Correlation between equitable distribution of resources and Muslim attitudes

In order to check the correlation between the equitable distribution of resources and Muslim attitudes, there was a scatter plot. As seen in Figure 5 below, there is a strong, positive correlation between the variables of equitable distribution of resources and Muslim attitudes, and the data is normally distributed.

Scatterplot of equitable distribution of resources and Muslim attitudes.
Figure 5: Scatterplot of equitable distribution of resources and Muslim attitudes.

After inspecting a positive correlation between the equitable distribution of resources and Muslim attitudes, a Pearson product-moment correlation coefficient was carried out to analyze the relationship between the equitable distribution of resources and customer Muslim attitudes. The results are in Table 6 below. As can be seen from this table, there was a medium positive correlation between the equitable distribution of resources and Muslim attitudes, with a correlation value of 0.455, which is significant at 0.01 level, indicating that higher levels of the equitable distribution of resources are associated with higher levels of Muslim attitudes.

Table 6: Correlation between equitable distribution of resources and Muslim attitudes

Muslim attitudes Equitable distribution of resources
Muslim attitudes Pearson Correlation 1 0.355**
Sig. (2-tailed) 0.000
N 164 164
Equitable distribution of resources Pearson Correlation 0.455** 1
Sig. (2-tailed) 0.000
N 164 164
**. Correlation is significant at the 0.01 level (2-tailed).

The correlation between Sharia-compliant products or financial services and Muslim attitudes

In order to check the correlation between Sharia-compliant products or financial services and Muslim attitudes, there was a scatter plot. As seen in Figure 6 below, there is a strong, positive correlation between the variables of Sharia-compliant products or financial services and Muslim attitudes, and the data is normally distributed.

Scatterplot of Sharia-compliant products or financial services and Muslim attitudes.
Figure 6: Scatterplot of Sharia-compliant products or financial services and Muslim attitudes

After inspecting a positive correlation between Sharia-compliant products or financial services and Muslim attitudes, there was a Pearson product-moment correlation coefficient was to analyze the relationship between Sharia-compliant products or financial services and customer Muslim attitudes. The results are in table 7 below. As can be seen from this table, there was a strong positive correlation between Sharia-compliant products or financial services and Muslim attitudes, with a correlation value of 0.765, which is significant at 0.01 level, indicating that higher levels of Sharia-compliant products or financial services are associated with higher levels of Muslim attitudes.

Table 7: Correlation between Sharia-compliant products or financial services and Muslim attitudes

Muslim attitudes Sharia-compliant products or financial services
Muslim attitudes Pearson Correlation 1 0.765**
Sig. (2-tailed) 0.000
N 164 164
Sharia-compliant products or financial services Pearson Correlation 0.765** 1
Sig. (2-tailed) 0.000
N 164 164
**. Correlation is significant at the 0.01 level (2-tailed).

Regression analysis

Regression analysis is a statistical process for estimating the relationships among variables. More specifically, regression analysis helps to understand how the change of independent variables can affect the change of dependent variables. The correlation analysis above indicated that there are relationships between Sharia-compliant products or financial services, equitable distribution of resources, stability in money value, social development, resource optimization, economic development, and Muslim attitudes. In order to find out how these variables influence customer Muslim attitudes and which one has the biggest impact, the multiple linear regression is used.

Table 8: Model Summary

Model R R Square Adjusted R Square Std. The error of the Estimate Durbin-Watson
dimension0 1 0.779a 0.538 0.536 0.19111 1.948
a. Predictors: (Constant), Sharia-compliant products or financial services, Equitable distribution of resources, Stability in money value, Social development, Resource optimization, Economic development
b. Dependent Variable: Muslim attitudes

The Adjusted R Square is 0.536, which means that the independent variables of Sharia-compliant products or financial services, equitable distribution of resources, stability in money value, social development, resource optimization, and economic development can explain 53.6% of the variance of Muslim attitudes.

Table 9: ANOVA

Model Sum of Squares df Mean Square F Sig.
1 Regression 90.280 6 15.047 411.961 0.000a
Residual 5.917 162 0.037
Total 96.197 168
a. Predictors: (Constant), Sharia-compliant products or financial services, Equitable distribution of resources, Stability in money value, Social development, Resource optimization, Economic development
b. Dependent Variable: Muslim attitudes

By summarizing the ANOVA table, it can be said that the independent variables of Sharia-compliant products or financial services, equitable distribution of resources, stability in money value, social development, resource optimization, and economic development can predict the dependent variable of Muslim attitudes at a significance of 0.01, by considering F=411.961.

Table 10: Coefficients

Unstandardized Coefficients Standardized Coefficients t Sig. Collinearity Statistics
B Std. Error Beta Tolerance VIF
(Constant) -0.289 0.101 -2.854 0.005
Stability in money value 0.286 0.054 0.283 2.203 0.032 0.142 1.059
Economic development 0.258 0.067 0.212 2.073 0.047 0.207 2.374
Social development 0.336 0.036 0.334 3.490 0.000 0.329 2.044
Resource optimization 0.312 0.041 0.307 2.808 0.007 0.281 3.563
Equitable distribution of resources 0.426 0.033 0.424 5.774 0.000 0.390 2.564
Sharia-compliant products or financial services 0.478 0.022 0.437 6.732 0.000 0.827 1.209
a. Dependent Variable: Muslim attitudes

The regression results are in Table 10 above. According to the results, there is no collinearity problem among the independent variables as the VIF values for all independent variables are less than 10, and the Tolerance value for all variables is above 0.1. It is found that Sharia-compliant products or financial services, equitable distribution of resources, stability in money value, social development, resource optimization, and economic development can significantly impact Muslim attitudes, with sig values all less than 0.05.

Specifically, Sharia-compliant products or financial services have the biggest impact on Muslim attitudes, with a standardized coefficient value of 0.437, followed by equitable distribution of resources, with a standardized coefficient value of 0.424 and social development, with a value of 0.334. The economic development has the smallest impact on Muslim attitudes, with a standardized coefficient value of 0.212.

Limitations of the study

There has been a considerable measure of concerns on extra-budgetary costs of the gathering of the information, paying little mind to whether the accumulated information is truly genuine or not and whether there may be an unequivocal conclusion when translating and breaking down the information. What’s more, a few representatives were hesitant to offer some data that they considered to be private and perilous in the hands of their competitors. This represented an extraordinary test in the examination as the researcher needed to take a more drawn out time.

Conclusion

The main aim of this research study is to analyze the Muslim investor attitudes towards investing in global stock markets and companies. In line with this objective, the paper identifies some variables as explanatory variables. These variables are Sharia-compliant products or financial services, stability in money value, economic development, social development, resource optimization, and equitable distribution of resources. To further build up the overall economy, the Islamic Sharia asks and empowers that kind of trade that outcomes in the formation of genuine utility, whether done straightforwardly or indirectly by a method for productive intervention or through secondary production services in the near future or in the long run (source).

The SAC has been trusted with roles to play to bring sanity to the market. The first role is to expedite the advancement and regulation of new items. The second role is to provide more prominent clarity and improve market certainty and trustworthiness through the dispersal of Sharia decisions. The third role is to initiate constant communication with industry and other Sharia specialists to give valuable criticism to help in decision making. And the fourth role is to participate in the worldwide gatherings and dialogs to upgrade the mindfulness and comprehension of Malaysia’s ICM.

The study found out that Islamic security is not alike to the common conventional securities because they have to satisfy various conditions. It ought to be focused on the states of sharing the profits and losses in a reasonable, plain condition on the legitimate guidelines administering the mudarabah and the partnership contracts fundamentally. In addition, the resources assembled through these securities (issued on no premium premise) ought not to be rechanneled to establishments that do not work in line with Sharia and to firms managing interests for every one of their exercises by utilizing Islamic bank.The piece of ownership in a company is ‘the stock’.

The holders of the stock have a right to share all the residual income after the fixed income has been claimed. Stocks exist in different kinds. The first one is common stock. This kind of shock is influenced by profit and loss. The second type is the preferred stock. This kind of stock has a pre-fixed rate that is used to determine and calculate the share from the profits that the company realizes. The third and final one is the loan stock. This kind of stock has a fixed rate of interest that enables it to earn its profits.

The stock exchange plays a wide variety of roles which are considered to be more significant to a country. First and foremost, the stock exchange creates a business sector that can contain several buyers and sellers at the same time. Secondly, the stock market conveys the necessary and viable information that benefits prospective buyers and sellers. Thirdly, the stock market plays the part of a tool that supplies assets and sufficient funds for companies. Finally, the stock market creates a platform for companies and corporations to raise capital for starting up or expanding the business.

Islamic security is not alike to the common conventional securities because they have to satisfy various conditions. The first condition is that it ought to be focused on the states of sharing the profits and losses in a reasonable, plain condition on the legitimate guidelines administering the mudarabah and the partnership contracts fundamentally.

The second condition is that the resources assembled through these securities (issued on no premium premise) ought not to be rechanneled to establishments that do not work in line with Sharia and to firms managing interests for every one of their exercises by utilizing Islamic bank. The third condition is that the capital assembled through these securities ought to be used in significant projects that unmistakably satisfy the general public enthusiasm of the Muslim society and ought not to contribute non-Muslim foreign nations. Thus, it is normal that the Islamic securities exchange won’t be completely self-regulated without any government mediation.

The Sharia empowers the utilization of benefit sharing and organization schemes and precludes riba (interest), may (betting and other games of chance), and gharar (offering something that is not possessed or that can’t be portrayed in precise details as far as sort, size, and sum). As a rule, the key guideline in Islamic funds is the need to accomplish equity. The point along these lines is to circumvent unfairness to a party in exchange. These incorporate disallowances against jahala (obliviousness) and gharar (guesswork).

Recommendations

The stocks of organizations whose items are not allowed in Sharia are restricted to purchase or sale, for example, premium based banks and insurance agencies and so on. The second recommendation is that stocks of organizations that maintain the principles of Sharia, for example, Islamic banks and Islamic Insurance organizations are reasonable. Finally, the third recommendation is that the stocks of organizations whose items are reasonable yet the organization enjoys non-permitted exchanges, are not allowed.

Such prohibited habits include getting premium based financing, saving in banks for interest, making agreements that incorporate disallowed conditions, e.g., offering gold or silver, or giving gifts or offering firearms to the terrorist. Likewise, organizations that create passable items additionally deliver non-allowable items as a negligible line of production, and this class incorporates most organizations on the planet, for example, Microsoft and IBM. All these stocks are discouraged on a basic level as indicated by the Fiqh Academy. Also, this is a choice that really speaks to a lion’s share.

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IvyPanda. (2020, August 31). Muslim Attitudes to Investing in Global Stock Markets. Retrieved from https://ivypanda.com/essays/muslim-attitudes-to-investing-in-global-stock-markets/

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"Muslim Attitudes to Investing in Global Stock Markets." IvyPanda, 31 Aug. 2020, ivypanda.com/essays/muslim-attitudes-to-investing-in-global-stock-markets/.

1. IvyPanda. "Muslim Attitudes to Investing in Global Stock Markets." August 31, 2020. https://ivypanda.com/essays/muslim-attitudes-to-investing-in-global-stock-markets/.


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IvyPanda. "Muslim Attitudes to Investing in Global Stock Markets." August 31, 2020. https://ivypanda.com/essays/muslim-attitudes-to-investing-in-global-stock-markets/.

References

IvyPanda. 2020. "Muslim Attitudes to Investing in Global Stock Markets." August 31, 2020. https://ivypanda.com/essays/muslim-attitudes-to-investing-in-global-stock-markets/.

References

IvyPanda. (2020) 'Muslim Attitudes to Investing in Global Stock Markets'. 31 August.

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