Shariah screening and inflation pass-through: Evidence from global islamic equity sectors
SN Business and Economics, cilt.6, sa.9, 2026 (Scopus)
- Yayın Türü: Makale / Derleme
- Cilt numarası: 6 Sayı: 9
- Basım Tarihi: 2026
- Doi Numarası: 10.1007/s43546-026-01351-x
- Dergi Adı: SN Business and Economics
- Derginin Tarandığı İndeksler: Scopus, ABI/INFORM
- Anahtar Kelimeler: Financial screening, Inflation pass-through, Islamic equity indices, Panel data, Sectoral betas, Shariah-compliant equities
- Ankara Yıldırım Beyazıt Üniversitesi Adresli: Evet
Özet
This study asks whether Shariah screening changes the sectoral transmission of inflation into equity returns, focusing on the Financials sector, where screening removes the interest-based banking activities that drive the inflation sensitivity of conventional financial stocks. The gap this paper fills is specific. Existing work compares aggregate Islamic and conventional benchmarks and asks whether Islamic equities hedge inflation on average; it does not ask which screening rule changes which inflation channel, and it does not test the sector where the excluded activity is economically central. This paper is, to the author’s knowledge, the first to treat Shariah screening as an identified institutional mechanism acting on a named sectoral transmission channel, and to test that mechanism against a matched conventional benchmark holding sector definition, sample period and inflation measure constant. Using monthly returns for 19 Dow Jones Islamic Market portfolios from April 2013 to April 2026, matched to regional year-on-year CPI inflation, the paper estimates baseline panel models, sector-specific inflation betas, a matched conventional Financials benchmark comparison, regime and structural-stability tests, and distributional robustness checks. The most important result is sectoral: Shariah Financials have an inflation beta that is economically small, statistically indistinguishable from zero and from the nonfinancial Shariah-sector average, and this result is stable across five alternative common-factor specifications, across the 2021–2023 inflation surge, and under dependence-robust inference. The matched conventional global Financials portfolio has a positive but modest inflation beta, and the Shariah-minus-conventional difference carries the predicted negative sign without reaching significance; a formal power analysis shows the test can detect a gap of 0.41% points per percentage point of inflation at conventional power, so the sample cannot adjudicate the economically plausible range and the cross-universe evidence is reported as directionally consistent rather than decisive. A formal quantile test of the cross-universe difference does reject: the gap is significantly negative in the lower-middle tail and is not constant across the return distribution. Decomposing inflation into expected and unexpected components does not change these conclusions. The practical implication is that Islamic investors should not rely on Shariah Financials as an inflation hedge in the way conventional investors may rely on bank-heavy financial sectors, and the paper sets out which Shariah-compliant exposures can carry that role instead.