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Islamic Market Optimal Portfolio Selection: A Note on the Use of Multidimensional Scaling and Data Reduction
Mohamed Albohali, Ibrahim Affaneh, Robert Boldin

Last modified: 2011-09-08


Thirty seven Islamic indices were examined in an attempt to determine which market sectors would be most suitable for investments. To accomplish this, daily returns were analyzed for the period between November 22, 2004 and November 13, 2009. Factor analysis was employed to divide the markets into uncorrelated groups in an effort to understand which markets provide a better selection when constructing portfolios. The results showed that the independent groups explained almost 87% of the variability of the original variables. Further analysis will focus on the common characteristics of each index as they relate to such factors as region, industry and size.


Islamic Index, Portfolio Risk, Factor Analysis, Multidimensional Scaling