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...
| Main Author: | |
|---|---|
| Format: | Proceeding Paper |
| Language: | English English English |
| Published: |
2015
|
| Subjects: | |
| Online Access: | http://irep.iium.edu.my/44745/ http://irep.iium.edu.my/44745/1/Ipafem_2015_Glasgow_presented_paper.pdf http://irep.iium.edu.my/44745/3/IPAFEM_Program.pdf http://irep.iium.edu.my/44745/13/44745-ppt.pdf |
| _version_ | 1848782657127710720 |
|---|---|
| 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 | 2025-11-14T16:08:56Z |
| format | Proceeding Paper |
| id | iium-44745 |
| institution | International Islamic University Malaysia |
| institution_category | Local University |
| language | English English English |
| last_indexed | 2025-11-14T16:08:56Z |
| publishDate | 2015 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | iium-447452021-07-23T07:23:27Z http://irep.iium.edu.my/44745/ 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. 2015 Proceeding Paper PeerReviewed application/pdf en http://irep.iium.edu.my/44745/1/Ipafem_2015_Glasgow_presented_paper.pdf application/pdf en http://irep.iium.edu.my/44745/3/IPAFEM_Program.pdf application/pdf en http://irep.iium.edu.my/44745/13/44745-ppt.pdf Mohamad, Azhar (2015) Creating a two-way market via short selling and its potential use in the Islamic paradigm. In: International Conference on Islamic Perspective of Accounting, Finance, Economics and Management (IPAFEM 2015), 7-9 April, 2015, University of Glasgow, Scotland. (Unpublished) http://www.gla.ac.uk/schools/business/newsandevents/headline_389561_en.html |
| 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 |
| title_full | Creating a two-way market via short selling and its potential use in the Islamic paradigm |
| 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 |
| 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/44745/ http://irep.iium.edu.my/44745/ http://irep.iium.edu.my/44745/1/Ipafem_2015_Glasgow_presented_paper.pdf http://irep.iium.edu.my/44745/3/IPAFEM_Program.pdf http://irep.iium.edu.my/44745/13/44745-ppt.pdf |