Some preliminary evidence of price discovery in Islamic banks

Research output: Contribution to journalArticle


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.


  • Paresh Kumar Narayan
  • Susan Sunila Sharma
  • Kannan Sivananthan Thuraisamy
  • Joakim Westerlund
External organisations
  • Deakin University
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics


  • Bank stocks, Islamic countries, Portfolio, Price discovery, Profits
Original languageEnglish
Pages (from-to)107-122
JournalPacific Basin Finance Journal
Early online date2017 Dec 15
StatePublished - 2018
Publication categoryResearch