Performance of global Islamic versus conventional share indices: International evidence

•Lack of empirical studies in Islamic finance despite fast growth•Guide investors in their decision with information on the risk and return relation.•Islamic indices outperformed their respective conventional indices during bear periods.•Differences in risk-adjusted performances enable investors to diversify during different cycles.

This paper provides empirical evidence on risk-adjusted performance comparisons of share indices from Islamic and conventional markets. To ensure valid comparisons, the selected Islamic indices are matched with conventional indices. The Treasury-bill rate and the MSCI All-World index are used as risk-free rate and world benchmark, respectively. Monthly returns are analyzed and four sub-periods are examined as crisis and non-crisis periods. Findings reveal that Islamic indices outperformed their conventional counterparts during crisis periods but results are inconclusive for the non-crisis periods. This could be due to the conservative nature of Shari'ah-compliant investments offering investors superior investment alternative during crisis.