Some preliminary evidence of price discovery in Islamic banks

Paresh Kumar Narayan, Susan Sunila Sharma, Kannan Sivananthan Thuraisamy, Joakim Westerlund

Research output: Contribution to journalArticleResearchpeer-review

10 Citations (Scopus)


In this paper using time-series data for a large number of Islamic bank stocks belonging to eight Islamic countries we test for evidence of price discovery. We find that in each of the eight countries there appears a bank that dominates the price discovery process. We then utilize this information on price discovery to form a portfolio of price discovery dominating bank stocks and compare its performance with portfolios of banks characterized by country and volatility. We show that buying a portfolio of price discovery dominant banks and selling most of the country-specific and volatility portfolios allow an investor to maximise profits or minimise loss. Our results are (a) robust to non-Islamic banks and to a larger sample of combined Islamic and non-Islamic banks, and (b) suggest that economic significance of price discovery is stronger for non-Islamic banks.

Original languageEnglish
Pages (from-to)107-122
Number of pages16
JournalPacific Basin Finance Journal
Publication statusPublished - Dec 2018
Externally publishedYes


  • Bank stocks
  • Islamic countries
  • Portfolio
  • Price discovery
  • Profits

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