What explains the financial performance of Shariah compliant investments?
Many studies have set forth that Shariah Compliant Investments (SCI) and Conventional Investments (CI) record similar financial performances. Such a result goes against the basic principles of modern portfolio theory. The aim of this paper is to provide several explanations for these counterintuitive results using an empirical corpus composed by 37 studies. Through a case of index reconstruction, we set forth that the exclusion of the financial sector combined with pro-cyclical negative screening methods play an important role in explaining the financial performance of the SCI.