Efficiency of Islamic Financial Markets

Mohammad M. Bani Essa, Abdalla M. Al Badarin


This study aims to explore the impact of the provisions of Sharee'ah that are related to the market on the efficiency of the financial markets, and their role in increasing the ability of financial markets to price securities fairly. The study showed that there are many provisions of Sharee'ah which can regulate the structure of the market and guarantee the function of the market mechanism of supply and demand. It also showed that there are a group of provisions that can guarantee the freedom for all dealers and provide them with the relevant information. Furthermore, the study provides evidence supporting the ability of Sharee'ah in providing the economic agents with the accurate information which will be reflected in the prices of securities. Finally, the study showed the importance of self-monitoring of participants as well as the importance of controlling of financial markets administration.


Islamic financial markets, efficiency, information, the provisions of Sharee'ah, fair pricing

Full Text:



Avgouleas, Emilios (2015). The Mechanics and Regulation of Market Abuse, A Legal and Economic Analysis. Oxford University Press, New York, USA, 1st edition.

Bailey, Roy (2005). The Economics of Financial Markets. Cambridge University Press, Cambridge, UK, 1st edition.

Benmelech, Efraim. and Dlugosz, Jennifer (2009). The Credit Rating Crisis, National Bureau of Economic Research. 34: 161-207.

Bodie, Zvi., Kane, Alex. And Marqus, Alan (2008). Investments. McGraw-Hill Education, Boston, USA, 7th International Edition.

Davidson, Paul (2002). Financial Markets, Money and the Real World. Edward Elgar Publishing, Inc., Massachusetts, USA, 1st edition

Fama, Eugene (1970). Efficient capital markets: a review of theory and empirical work, Journal of Finance, 25 (2): 383–417.

Guyot, Alexis (2011). Efficiency and Dynamics of Islamic Investment: Evidence of Geopolitical Effects on Dow Jones Islamic Market Indexes, Emerging Markets Finance & Trade, 47(6): 24–45.

Hirschey, Mark. & Nofsinger, John (2010). Investments: Analysis & Behavior. McGraw-Hill/Irwin, Boston, USA, 2nd edition.

Hussein, Khaled., and Omran, Mohammed (2005). Ethical Investment Revisited: Evidence from Dow Jones Islamic Indexes, Journal of Investing, 14(3): 105-126.

International Organization of Securities Commissions (2013). Investigating and Prosecuting Market Manipulation, IOSCO Working Papers, Madrid, Spain.

Jarrow, Robert. and Larsson, Martin (2011). The Meaning of Market Efficiency, Mathematical Finance Journal, 22(1): 1-30.

Jensen, M (1978). Some anomalous evidence regarding market efficiency, Journal of Financial Economics, 6: 95-101.

Kia, Amir (2015). Islamic Economics Rules and the Stock Market: Evidence from the United States, International Journal of Business, 20(3): 181- 201.

McGroarty, Frank., Gwilym, Owain. and Thom as, Stephen (2009). The role of private information in return volatility, bid–ask spreads and price levels in the foreign exchange market, Journal of International Financial Markets, Institutions & Money, Elsevier, 19: 387–401.

Obaidullah, Mohammed (2001). Ethics and Efficiency In Islamic Stock Markets, International Journal of Islamic Financial Services, 3)2(: 2-11.

Rose, Peter. S. and Marquis Milton. H (2006). Money and Capital Markets. McGraw-Hill/Irwin, Boston, USA, 9th International Edition.

Ross, Stephen., Westerfield, Randolph., Jafee, Jeffrey. Jordan, Bradford (2008). Modern Financial Management. McGraw-Hill/Irwin, Boston, USA, 8th International Edition.

Samuelson, Paul. And Nordhaus, William (1998). Economics, , McGraw-Hill Companies, Inc., Boston, USA, 16th Edition.

Tag El-Din, Seif (1996). The Stock-Exchange from an Islamic Perspective, Journal of KAU Islamic Economics, 8: 31-49.

Titan, Alexandra. Gabriela (2015). The Efficient Market Hypothesis: review of specialized literature and empirical research, Procedia Economics and Finance, 32: 442 – 449.

Tuna, Gulfen. and Uysal, Mustafa (2015). Is Turkey’s Islamıc Stock Market Effıcıent? Evidence from Borsa Istanbul, The Empirical Economics Letters, 14(9): 915-923.

Turner, Adair. et al (2010). The Future of Finance. London School of Economics and Political Science., London.

Wilson, Rodney (1997). Islamic finance and ethical Investment, International Journal of Social Economics, 24(11): 1325-1342.

Vlad, Andreea (2014). Financial Market Manipulation: How to identify the Mechanisms, International Journal of Economic Practices and Theories, 4(1): 77-88.

Wirama, Dewa., Wiksuana, Gusti., Sanusi, Mohd. and Kazemian, Soheil (2017). Price Manipulation by Dissemination of Rumors: Evidence from the Indonesian Stock Market, International Journal of Economics and Financial, 7(1): 429-434.


  • There are currently no refbacks.