Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices
We introduce the Reward–VaR curve, a novel framework for evaluating risk-adjusted investment performance across a range of investor risk preferences. When returns are normally distributed, the Reward–VaR curve yields the same asset ranking as the Sharpe ratio. However, when the third-order modified...
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| المؤلف الرئيسي: | |
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| مؤلفون آخرون: | |
| التنسيق: | article |
| منشور في: |
2025
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| الموضوعات: | |
| الوصول للمادة أونلاين: | https://hdl.handle.net/11073/33300 |
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إضافة وسم
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| _version_ | 1864513431808245760 |
|---|---|
| author | Leduc, Guillaume |
| author2 | Perera, Shyam Sanjeewa Nishantha |
| author2_role | author |
| author_facet | Leduc, Guillaume Perera, Shyam Sanjeewa Nishantha |
| author_role | author |
| dc.creator.none.fl_str_mv | Leduc, Guillaume Perera, Shyam Sanjeewa Nishantha |
| dc.date.none.fl_str_mv | 2025-11-07 2026-04-20T04:52:48Z 2026-04-20T04:52:48Z |
| dc.format.none.fl_str_mv | application/pdf |
| dc.identifier.none.fl_str_mv | Leduc, G., &Perera, S. S. N. (2025). Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices. Journal of Risk and Financial Management, 18(11), 623. https://doi.org/10.3390/jrfm18110623 1911-8074 https://hdl.handle.net/11073/33300 10.3390/jrfm18110623 |
| dc.language.none.fl_str_mv | en |
| dc.publisher.none.fl_str_mv | MDPI |
| dc.relation.none.fl_str_mv | https://doi.org/10.3390/jrfm18110623 |
| dc.rights.none.fl_str_mv | Attribution 4.0 International http://creativecommons.org/licenses/by/4.0/ |
| dc.subject.none.fl_str_mv | Asset ranking Risk profile Risk-adjusted performance Islamic finance Value-at-Risk Bootstrapping |
| dc.title.none.fl_str_mv | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices |
| dc.type.none.fl_str_mv | Peer-Reviewed Published version info:eu-repo/semantics/publishedVersion info:eu-repo/semantics/article |
| description | We introduce the Reward–VaR curve, a novel framework for evaluating risk-adjusted investment performance across a range of investor risk preferences. When returns are normally distributed, the Reward–VaR curve yields the same asset ranking as the Sharpe ratio. However, when the third-order modified VaR is used, a new paradigm emerges beyond the simplistic “better/worse” ranking: if no asset dominates at all confidence levels, one becomes preferable for risk-averse investors, while the other is favored by the risk-tolerant. For empirical implementation, we incorporate bootstrapping to separate robust performance patterns from sampling noise. We apply the methodology to compare conventional equity indices and their Islamic counterparts from the S&P Dow Jones Global Index family across nine markets from 2000 to 2024: Asia-Pacific, Canada, Developed, Emerging, Europe, Japan, UK, US, and World. Our empirical results reveal market-condition dependent dominance patterns. During bull markets, conventional indices dominate in most regions, except the European and World markets, where no dominance is observed, and Japan, where the Islamic index outperforms. In bear markets, Islamic indices dominate in most regions, with the exception of Emerging Markets, where dominance is partial, and Japan, where no clear difference is observed. Over the full sample, most markets show no significant long-run AcademicEditor: ThanasisStengos Received: 21September2025 Revised: 22October2025 Accepted: 3November2025 Published: 7 November2025 Citation: Leduc, G., &Perera, S. S. N. (2025). Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices. Journal of Risk and Financial Management, 18(11), 623. https://doi.org/10.3390/jrfm18110623 Copyright: ©2025bytheauthors. Licensee MDPI,Basel,Switzerland. This article is an open access article distributed under the termsand conditions of the Creative Commons Attribution (CC BY)license (https://creativecommons.org/ licenses/by/4.0/). dominance, except Canada and Emerging Markets, where conventional indices outperform. |
| format | article |
| id | aus_2549d8dd49d5da499baa835d2fcc15a4 |
| identifier_str_mv | Leduc, G., &Perera, S. S. N. (2025). Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices. Journal of Risk and Financial Management, 18(11), 623. https://doi.org/10.3390/jrfm18110623 1911-8074 10.3390/jrfm18110623 |
| language_invalid_str_mv | en |
| network_acronym_str | aus |
| network_name_str | aus |
| oai_identifier_str | oai:repository.aus.edu:11073/33300 |
| publishDate | 2025 |
| publisher.none.fl_str_mv | MDPI |
| repository.mail.fl_str_mv | |
| repository.name.fl_str_mv | |
| repository_id_str | |
| rights_invalid_str_mv | Attribution 4.0 International http://creativecommons.org/licenses/by/4.0/ |
| spelling | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional IndicesLeduc, GuillaumePerera, Shyam Sanjeewa NishanthaAsset rankingRisk profileRisk-adjusted performanceIslamic financeValue-at-RiskBootstrappingWe introduce the Reward–VaR curve, a novel framework for evaluating risk-adjusted investment performance across a range of investor risk preferences. When returns are normally distributed, the Reward–VaR curve yields the same asset ranking as the Sharpe ratio. However, when the third-order modified VaR is used, a new paradigm emerges beyond the simplistic “better/worse” ranking: if no asset dominates at all confidence levels, one becomes preferable for risk-averse investors, while the other is favored by the risk-tolerant. For empirical implementation, we incorporate bootstrapping to separate robust performance patterns from sampling noise. We apply the methodology to compare conventional equity indices and their Islamic counterparts from the S&P Dow Jones Global Index family across nine markets from 2000 to 2024: Asia-Pacific, Canada, Developed, Emerging, Europe, Japan, UK, US, and World. Our empirical results reveal market-condition dependent dominance patterns. During bull markets, conventional indices dominate in most regions, except the European and World markets, where no dominance is observed, and Japan, where the Islamic index outperforms. In bear markets, Islamic indices dominate in most regions, with the exception of Emerging Markets, where dominance is partial, and Japan, where no clear difference is observed. Over the full sample, most markets show no significant long-run AcademicEditor: ThanasisStengos Received: 21September2025 Revised: 22October2025 Accepted: 3November2025 Published: 7 November2025 Citation: Leduc, G., &Perera, S. S. N. (2025). Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices. Journal of Risk and Financial Management, 18(11), 623. https://doi.org/10.3390/jrfm18110623 Copyright: ©2025bytheauthors. Licensee MDPI,Basel,Switzerland. This article is an open access article distributed under the termsand conditions of the Creative Commons Attribution (CC BY)license (https://creativecommons.org/ licenses/by/4.0/). dominance, except Canada and Emerging Markets, where conventional indices outperform.American University of SharjahMDPI2026-04-20T04:52:48Z2026-04-20T04:52:48Z2025-11-07Peer-ReviewedPublished versioninfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfLeduc, G., &Perera, S. S. N. (2025). Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices. Journal of Risk and Financial Management, 18(11), 623. https://doi.org/10.3390/jrfm181106231911-8074https://hdl.handle.net/11073/3330010.3390/jrfm18110623enhttps://doi.org/10.3390/jrfm18110623Attribution 4.0 Internationalhttp://creativecommons.org/licenses/by/4.0/oai:repository.aus.edu:11073/333002026-04-20T06:46:30Z |
| spellingShingle | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices Leduc, Guillaume Asset ranking Risk profile Risk-adjusted performance Islamic finance Value-at-Risk Bootstrapping |
| status_str | publishedVersion |
| title | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices |
| title_full | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices |
| title_fullStr | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices |
| title_full_unstemmed | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices |
| title_short | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices |
| title_sort | Ranking Investment Opportunities Across Risk-Aversion Levels: Application to Islamic and Conventional Indices |
| topic | Asset ranking Risk profile Risk-adjusted performance Islamic finance Value-at-Risk Bootstrapping |
| url | https://hdl.handle.net/11073/33300 |