J. of Multi. Fin. Manag. 29 (2015) 115–138 Contents lists available at ScienceDirect Journal of Multinational Financial Management journal homepage: www.elsevier.com/locate/econbase Risk-return characteristics of Islamic equity indices: Multi-timescales analysis Ginanjar Dewandaru a,∗ , Obiyathulla Ismath Bacha b,1 , A. Mansur M. Masih b,1 , Rumi Masih c a General Council for Islamic Banks and Financial Institutions (CIBAFI), Manama, Bahrain b The Global University of Islamic Finance (INCEIF), Lorong Universiti A, 59100 Kuala Lumpur, Malaysia c Bank of New York Mellon Asset Management, One Wall Street, New York, NY 10286, USA a r t i c l e i n f o Article history: Received 14 April 2014 Accepted 26 November 2014 Available online 8 December 2014 JEL classification: C1 C4 G1 G2 G3 P5 Keywords: Shariah-compliant stocks Risk-return profile Systemic risk Wavelet analysis Islamic finance a b s t r a c t This paper is motivated by the heightened interest in investing in Islamic equities. The paper is the first attempt at analysing the risk- return characteristics of Islamic indices at different timescales by applying a relatively new approach in finance known as wavelet analysis. We analyze the Dow Jones indices of 11 countries, mostly emerging markets, and 10 global sectors between 2008 and 2012. We focus on exploring the multi-horizon nature of systemic risk (market beta), average return, volatility, and correlation. We find that the differences in betas between Islamic and con- ventional indices at most of the timescales are not statistically significant. A few exceptions show equal returns with lower risks for Islamic indices mostly at higher time scales (longer horizons) in some countries as well as 6 out of 10 sectors. We also find lower correlations for some Islamic sector-pairs (financials, utilities and consumer services) at lower time scales (shorter horizons). © 2014 Elsevier B.V. All rights reserved. ∗ Corresponding author. Tel.: +973 34517825. E-mail addresses: gdewandaru@yahoo.com (G. Dewandaru), obiya@inceif.org (O.I. Bacha), mansurmasih@gmail.com (A.M.M. Masih), Masih@BNYMellon.com (R. Masih). 1 Tel.: +60 173841464. http://dx.doi.org/10.1016/j.mulfin.2014.11.006 1042-444X/© 2014 Elsevier B.V. All rights reserved.