MSc JUNE 2021

FN5623 ISLAMIC PORTFOLIO MANAGEMENT

ASSIGNMENT

1. Discuss the theoretical, operational and implementational challenges for Islamic

Finance in the current globalized world.

2. “Reluctance to promote risk-sharing finance, limited market-based financial

intermediation and lack of holistic financial system are the major gaps in the Islamic
Financial Industry”. Do you agree? Discuss.

3. Discuss the “Portfolio Management Process” and the main assumptions supporting
this process.

Portfolio management Process is integrated compilation of set procedures and phases

implemented in a consisted way creating and managing a suitable portfolio of assets in
achieving client’s goals.
The main assumption is the rationality among investors in which they behave in
maximising their utility given a level of income and disposal income from the
consumers.

4. Explain the five significant breakthroughs in financial research and their application
in portfolio management.
Efficient market hypothesis. Here markets are perfectly and have relevant information
that is incorporated into the market prices of securities in the market. Basically, applied
by the index-tracking fund investors for instance S&P 500, MSCI Emerging markets.
They invest in passive or low portfolio.
Modern portfolio theory. The theory here assumes that the investors are risk averse in
nature, they prefer lower risk value for in a given level investment. Modern portfolio
theory is applied in efficient frontier. Any portfolio lying away from the efficient
frontier line is undesirable.
Dow theory. The theory argues that the prices of stocks do not change randomly, they
move in cyclical trends. This is applied in major trends reversal that can be identified
through technical analysis. For instance, long term bottoms and long terms bottoms
which is identified by charts is a goon application in Dow theory.