Creating a two-way market via short selling and its potential use in the Islamic paradigm
Short selling is the selling of a security that the seller does not own. In conventional finance, the ability to short is considered an important element of an efficient and complete market. For most Muslim scholars, however, short selling is deemed undesirable when read in conjunction with the Hadi...
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| Format: | Article |
| Language: | English |
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International Islamic University Malaysia
2013
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| Online Access: | http://irep.iium.edu.my/32663/ http://irep.iium.edu.my/32663/1/Azhar.pdf |
| _version_ | 1848780604561162240 |
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| author | Mohamad, Azhar |
| author_facet | Mohamad, Azhar |
| author_sort | Mohamad, Azhar |
| building | IIUM Repository |
| collection | Online Access |
| description | Short selling is the selling of a security that the seller does not own. In conventional finance, the ability to short is considered an important element of an efficient and complete market. For most Muslim scholars, however, short selling is deemed undesirable when read in conjunction with the Hadith “la tabi’ ma laysa ‘indaka”, which carries a verbatim meaning of “sell not what is not with you”. There are, however, alternative interpretations of this Hadith that may justify the use of covered short selling as one of the legitimate instruments in the Islamic paradigm. Covered short selling, which entails borrowing a security for the purpose of shorting it, may be used efficiently to lower asset prices, as theorized by Miller (1977). This paper discusses about the short selling mechanism and argues that short selling may be beneficial to consumers in an Islamic market as it creates a two-way market mechanism and can be used to stabilize asset prices. |
| first_indexed | 2025-11-14T15:36:19Z |
| format | Article |
| id | iium-32663 |
| institution | International Islamic University Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T15:36:19Z |
| publishDate | 2013 |
| publisher | International Islamic University Malaysia |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | iium-326632021-07-23T07:21:58Z http://irep.iium.edu.my/32663/ Creating a two-way market via short selling and its potential use in the Islamic paradigm Mohamad, Azhar HG4501 Stocks, investment, speculation Short selling is the selling of a security that the seller does not own. In conventional finance, the ability to short is considered an important element of an efficient and complete market. For most Muslim scholars, however, short selling is deemed undesirable when read in conjunction with the Hadith “la tabi’ ma laysa ‘indaka”, which carries a verbatim meaning of “sell not what is not with you”. There are, however, alternative interpretations of this Hadith that may justify the use of covered short selling as one of the legitimate instruments in the Islamic paradigm. Covered short selling, which entails borrowing a security for the purpose of shorting it, may be used efficiently to lower asset prices, as theorized by Miller (1977). This paper discusses about the short selling mechanism and argues that short selling may be beneficial to consumers in an Islamic market as it creates a two-way market mechanism and can be used to stabilize asset prices. International Islamic University Malaysia 2013-12 Article PeerReviewed application/pdf en http://irep.iium.edu.my/32663/1/Azhar.pdf Mohamad, Azhar (2013) Creating a two-way market via short selling and its potential use in the Islamic paradigm. International Journal of Economics, Management and Accounting, 21 (2). pp. 29-43. ISSN 0128-006 http://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/244 |
| spellingShingle | HG4501 Stocks, investment, speculation Mohamad, Azhar Creating a two-way market via short selling and its potential use in the Islamic paradigm |
| title | Creating a two-way market via short selling and its potential use in the Islamic paradigm
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| title_full | Creating a two-way market via short selling and its potential use in the Islamic paradigm
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| title_fullStr | Creating a two-way market via short selling and its potential use in the Islamic paradigm
|
| title_full_unstemmed | Creating a two-way market via short selling and its potential use in the Islamic paradigm
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| title_short | Creating a two-way market via short selling and its potential use in the Islamic paradigm
|
| title_sort | creating a two-way market via short selling and its potential use in the islamic paradigm |
| topic | HG4501 Stocks, investment, speculation |
| url | http://irep.iium.edu.my/32663/ http://irep.iium.edu.my/32663/ http://irep.iium.edu.my/32663/1/Azhar.pdf |