Halal Money Matters

Episode 12: Behavioral Finance

Dr. Ziyaad Mahomed joins Halal Money Matters to discuss the study of behavioral finance, the psychology behind financial decisions, and the future of the field.

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Halal Money Matters Podcast

Episode 12 – Behavioral Finance

[music intro]

CHRISTOPHER PATTON: Welcome to Halal Money Matters presented by Saturna Capital. I’m Christopher Patton.

MONEM SALAM: And I’m Monem Salam.

CHRISTOPHER PATTON: We have an interesting episode because it kind of covers the psychological implications surrounding the decisions people make with their money.

MONEM SALAM: Yeah, it’s kind of odd. There’s not much study that has been done on it, but you know, in economics you can talk about the “rational man.” He makes all the right decisions. But in reality, that never happens, and so, behavioral economics, like behavioral finance, is something that’s being studied more and today we have a guest who has actually done some research on Islamic behavioral finance, so it’ll be more in-depth but I think he’s well suited for the job.

CHRISTOPHER PATTON: Yes, Dr. Ziyaad Mahomed. He’s a Professor at the Global University of Islamic Finance, Author, expert on all of these things.

MONEM SALAM: He’s originally from South Africa. I met him in Malaysia while I was out there. Really excited to talk to him and I think people will enjoy it.

CHRISTOPHER PATTON: Alright, let’s get into it and talk to Dr. Mahomed.

[music interlude]

CHRISTOPHER PATTON: Oh. I dropped my pencil. Great start. Great start.

DR. ZIYAAD MAHOMED: [laughter]

CHRISTOPHER PATTON: Let me retrieve my writing implement so that I may take notes freely. Alright, Dr. Mahomed, thank you for joining us today and just to get in at the ground level... when we talk about behavioral finance. Somebody says the phrase, “behavioral finance,” what, very generally, are they talking about?

DR. ZIYAAD MAHOMED: Thank you very much for having me. Yes, behavioral finance, generally made up of those two important words “behavior” and “finance” really seeks to kind of synergize two concepts, two theories, together: one being the theory of consumer psychology and how we think and what drives us and the other really focused on financial theory. What are the underlying market theories, investment theories, that can define or allow us to define the stock market? I could go a little bit more in-depth on this issue and just say that it is typically the study of investor behavior. When we put it together, behavioral finance is typically the science of investor behavior and what decisions one makes to optimize one’s investments. Some say, interestingly, it’s the study of the war between the brain and the heart in investment decisions. It’s the rational mind instructing towards safety and portion and then the emotional desire that’s driving us through our cultural norms, our past histories, our families, peer pressure, and even our emotional construct. That gives us a broader definition and understanding of what behavioral finance actually is.

MONEM SALAM: You know, it’s funny you say that. When we’re talking about this topic, when you mentioned this idea of investing and peer pressure, I’m reminded of just basically wanting to invest in a stock because other people are investing in it as well, not knowing maybe anything about the fundamentals of it, or whether it’s going to do well or not. It’s just, “Hey, everyone else is doing it. I might as well do it, too.” Is that pretty close to... I guess studying that behavior is what it is?

DR. ZIYAAD MAHOMED: Absolutely, and what you’re referring to is typically a herd behavior. So, this is a significant portion of why we study behavioral finance. It’s to understand what makes us tick. And here, when we look at peer groups running towards a specific stock or asset, we certainly believe that there is profit to be made. And this goes throughout history. We seem to follow where we believe others have made correct decisions. You know, we have a social trust construct within us. We believe others and we tend to want to believe that what they’re saying is true—or what their actions are—are true.

MONEM SALAM: That’s interesting. And so, where does this intersect with Islamic finance from your perspective? Or Islamic investing, for that matter.

DR. ZIYAAD MAHOMED: Islamic investing has some peculiar characteristics. Unique characteristics. Although, first of all, at the end of the day, we all are susceptible to the same biases. And because we are susceptible to those biases, we need to have some sort of barriers or constructs in the manner in which we consider our investment decisions. From an Islamic perspective, there are additional tools that we can use to manage that behavior. But if you ask whether Islamic finance does things differently from a behavioral perspective, then, theoretically, it’s true, but then practically, because of peer influence, cultural influence, and the environment, the context that we are in, we tend to follow those norms. So, you’d see a different behavior in Muslim-majority country as opposed to a behavior in a secular country where you are seeing investment decisions being made in different forms by different people with different biases and backgrounds.

MONEM SALAM: So, in that particular case, then, you know, let’s talk about that for a minute. You mentioned something about Muslim majority versus minority and what comes to mind is, you know, I think there are basically the two oldest funds that are available for investing Islamically, for example. One of them was started in Malaysia, right? Obviously, a Muslim country. But the second one was started in the US, which is a non-Muslim country. And so, do you think that some kind of behavioral finance has to do with why those two countries were picked for that, or was that fairly random?

DR. ZIYAAD MAHOMED: That’s an important perspective. So, first of all, when we talk about Muslim majority countries and investment decisions, we must separate between the markets providing supply of investment solutions and the market seeing investment solutions. So, there’s a demand and supply scenario here. So, in a Muslim majority country—let’s take for example Pakistan or Saudi Arabia—here, investment biases or decisions are affected by cultural norms. So, for example, you will find anomalies around calendar events like Ramadan. Investment behavior will be slightly different to outer-Ramadan behavior. And there are other religious experiences throughout the year that impact investment decisions. So, this is purely from a demand perspective. Now, if you look at the supply side, you have Malaysia and the US. There are many factors that have driven the development of such funds. Beyond, of course, there has to be that demand. There has to be that pull. But the push factor is quite prevalent and that’s because, firstly, from a Malaysian perspective, you have particular factors. The market is fairly sophisticated when it comes to regulation. There is a clear understanding that Islamic finance must be as competitive as conventional and there should be no barriers in restricting Islamic finance. In fact, there should be incentives in developing Islamic finance. So, the mindset of the culture in Malaysia is very much, “Islamic finance first,” in many institutions. So, it’s understandable why you would see the birth of investment funds or Islamic investment funds coming out of Malaysia. Naturally, you also have to look at the GDP. Income levels are very important. The level of conservatism and practice of Islam in a country will also be relevant. So, Malaysia is easily explained. But the US would require a little bit more insight. And perhaps, from the US perspective, and I am from South Africa. We’ve had this experience in South Africa and you can see whether that related to the US. In South Africa, we are 2% of the populations. Muslims represent 2% of the entire population. But that 2% has at least 10 Islamic funds, Shariah-compliant funds. It has 45 Islamic financial institutions. It has an Islamic pension fund and we have lobbied government to ensure we have a Shariah compliant fund. So, what gives rise to that? It’s a theory of survival. So, you’re looking at a very small minority. It’s a minority of a minority. And in order to survive, you need to be economically viable and economically strong. In order to do that, you need to ensure that you integrate what you believe with how you intend to make profits. And you cannot have them mutually exclusive. So, you have to bring them together. How do you bring them together? Well, that is when you become academic. You become professional. You actually push that Islamic investment technique. In the case of the US, you look for that solution or if you don’t have it, you actually construct the solution. So, that makes sense from a behavioral perspective as a minority. You want to survive. You want to be economically strong. And therefore, you begin to construct—around you—structures, solutions, that will allow you to thrive. 

CHRISTOPHER PATTON: So, you mention building structures and in your definition of behavioral finance, you phrased it as the consumer psychology and the underlying theories. So, when you’re looking at the application of Islamic finance... is that in the psychology or is it in the underlying theories? Or is it in both?

DR. ZIYAAD MAHOMED: Well, behavioral psychology is slightly different to financial theory. Financial theory has a strong underpinning of an objective analysis of the empirical data. Behavioral psychology is continuously evolving. Not that financial theory is not, but behavioral psychology is continuously evolving. As different norms change... we have a scenario of 2020, now 2021 with COVID. So, that has changed behavior already, so the impact is a lot more dynamic. So, I just wanted to state that because from a theory and practice perspective, you will find a much closer relationship in behavioral psychology. It’s not theory versus practice. Theory is really, very much based in practice and theory changes as you go along simply because practice changes. Whereas finance theory is a little bit more static in that you can go back all the way to the 30s and 40s and use those very same principles of market theory to explain away what’s happening in the stock markets today.

MONEM SALAM: So, when you’re talking about Ramadan and Muslim countries and behavioral patterns. Chris, let me ask you a question. In a month where Muslims are mostly fasting the entire day, from sunrise to sunset, what do you typically think would happen to food prices?

CHRISTOPHER PATTON: I would assume they would go down because there’s a decreased demand.

MONEM SALAM: That’s right. That’s right. However, you find that in the majority of Muslim countries that food prices go up and the reason is because the demand for food actually increases in Muslim countries. Maybe, Dr., you can explain a little more why this happens, but I think that does have something to do with behavior versus the theory... clearly from a financial perspective, you’d say, “Demand goes down so the price should come down,” but really the opposite happens.

DR. ZIYAAD MAHOMED: Yes, the opposite happens. The opposite happens, you know, I remember, our parents always telling us that, you know, your eyes are bigger than your stomach and during Ramadan, you’re quite hungry and you really... when asked what you’d like for iftar, to break the fast, you give a long list of everything that you’d like, but when it’s time to break the fast, you’re actually not able to eat much at all because you’ve fasted the whole day, your stomach has constricted and you’ve gotta take it in phases. So, usually what happens is, firstly, that you have that behavior. So, that behavior where you feel you need more but at the end of the day, you actually consume less. That’s one explanation. But there is another explanation and that is that because we are in such a rat race today where we are consistently working, a lot of energy is required, and therefore, you do find that those that are able to consume actually consume a significantly amount in the evenings and between fasting times. And they argue that and say, “Well we need that energy for the rest of the working day.” So, therefore the consumption increases. Now, there is another theory, and the other theory is the fact that during Ramadan, the type of food consumed is different than the type of food consumed outside of Ramadan. And very often, that food tends to demand certain ingredients that are generally more expensive than others. Or, even if they are not more expensive, they are more expensive in Ramadan. So, interestingly, you could buy dates or oil or rice, you know, at a very stable price outside of Ramadan, but a few weeks before, you suddenly start seeing the prices of these items that are commonly consumed in Ramadan go through the roof. Double. Triple. Et cetera. So, now, there’s a lot of increased expenditure in Ramadan even though the overall objective of Ramadan was to curb desire, was to manage our own behaviors and become more attentive. We tend to do the opposite. But there are so many factors at play that drive this type of behavior.

MONEM SALAM: That’s really good. You know, in the marketing that we do here in the US regarding Islamic investing, the Funds, those type of things... it’s really a balancing act, right? It’s about educating the investor about the potential for gains but at the same time being able to tell them what they’re currently doing—if they’re not doing Islamic—is the long-term loss... which is in the hereafter. So, I’m curious, from your perspective, if there have been studies done on, you know, what’s more effective. Is it the fear of the hellfire? Or is it the reward of this life? Or the hereafter? That type of thing.

DR. ZIYAAD MAHOMED: That’s an interesting question. I don’t know the answer to that. There haven’t been much that is done on whether the fear is a bigger factor than the enticement of gain. However, I can say that whether that is a correct approach of that investor or not, is not what we are debating here. What we’re saying is, “This is his nature.” And it reminds me of a student that once completed a master’s degree under me and worked in a bank as a Shariah advisor. Very excited, he comes to me with a brochure that he actually printed. And he said, “I want the bank to pass out this brochure. Please, open it up, Prof.” And I opened it up, and it had a picture of fire... literally, fire, right across from end to end. And I said, “Okay, what’s your objective, here?” He said, “If we are involved in riba, naturally we are heading for hellfire. I want every single customer to know this.” Do you think he would get any customers that way? Of course not.

MONEM SALAM: Not likely.

DR. ZIYAAD MAHOMED: He’d drive everyone away. So, is hellfire... and you know, we are very careful on what we are saying here... but is hellfire effective? It may not be the ultimate influence because the behavior pattern is such that, “Well, yes I am aware that there is hellfire and I ultimately hope for paradise because I live in a status of hope, and I don’t live in a status of fear. And because of that, I know that my creator is going to cast me over to heaven and paradise. So, if you’re going to talk about hell, then you are just a doomsday... kind of warner and I’m not ready to listen to you.”

MONEM SALAM: Yeah, and you know, when we are talking about shareholders... a lot of it is our audience. Some of them are entrepreneurs. And in the health care field and other fields. And I do remember in the conferences that you go to that have the bazaars, they have “halal” this and “halal” that. And you’re like, “Oh, I didn’t realize that my shampoo that I was buying wasn’t already halal.” It really also gets down to how do you, kind of, raise awareness that a product is genuinely not halal, but at the same time, you do get those scammers that come into ethnically driven markets and are able to scam people because they were able to convince them of something that really wasn’t there.

DR. ZIYAAD MAHOMED: Very much so. Halal has become a brand. And because it’s such a huge, huge sector, halal as a sector is much larger than Islamic finance, alone. You’re looking at approximately $7 trillion in the halal hub as opposed to less than $3 trillion on the Islamic finance side. So, it’s much larger and therefore you have halal on everything today. Now, there may be merit in—of course—halal certification on foods and certain types of products. But there is an excessive approach where toothpicks have halal certification. And water, spring water, has halal certification. I have seen that with my own eyes. So, you have that extreme which makes it sound very skeptical for those that are just doubting it. You know, at a minute level, they say, “Well this is just an extreme. Really, we should not be talking about halal here. It’s obviously halal.”

MONEM SALAM: Yeah, toothpicks and water is one but let’s look at it from our current environment we’re living in. I think Indonesia was the first one to certify a COVID vaccine as being halal by their certification committee. Again, the first question came into my mind was, “I didn’t realize mRNA could be haram,” for example, opposite of halal. I just found that to be very interesting. But a lot of people would not have taken the vaccine unless the agency would have certified it halal. So, there is that trust factor as well.

DR. ZIYAAD MAHOMED: Very much so. All of this is really built on enhancing that social trust. And social trust is a very key element in all of our contracts and out investments and just placing funds with you means that there is a level of trust that the investor has with you to make the correct decisions. So, that trust will now be extended towards saying, “Well, you’re not just making investment decisions on my behalf, but you are ensuring that those decisions are Shariah-compliant.” So, that’s an additional element that you’re providing, fulfilling that trust. Correct.

CHRISTOPHER PATTON: When we talk about explaining—kind of pulling it back to where we started a little bit—explaining financial decisions, explaining market behaviors... Is it used more commonly to look backward, or have you seen it applied much to trying to predict long-term trends?

DR. ZIYAAD MAHOMED: This is an important question because when you look at financial theory, financial theory tends to explain what has already occurred. So, it’s really past. Now, it’s hoping that it uses that same model to predict what is going to happen in the future? However, it has not been very successful at that. Because if it was, we wouldn’t be suffering such market crashes and these cycles. Now, does behavioral finance add an element or solve that problem by being able to predict, you know, future kind of behavior? Well, the answer is no. The future is very difficult to predict. It is very difficult to predict. But what you can do, is you can say, “Based on past norms, there is a likelihood, a probability, that we will be going down this particular road.” But you can never say for sure, so the quick answer to it is to say that behavioral finance attempts to fill a gap that finance theory itself has not been able to complete. Finance theory has established a very objective, scientific approach, but the gaps within that are such that you cannot predict the irrational investor. As much as we want to apply what we refer to as the efficient market hypothesis, we realize that it is only a basis for assessing the market and everything else. So, it’s only the first level. Thereafter, we need to provide more detail behavioral finance views and theories on how we can explain the approach to the run of cryptocurrency right now. Or, you know, we can link that to tulip fever in the 17th century and look at that behavior repeating itself, cyclically. So, this tends to complement existing market theory. Can it predict behavior? Well, this is the objective. Has it been successful yet? In certain elements. In certain elements, it has been effective. But of in the majority of scenarios, we have continuously affirmed one thing: that the market is really, very much in a random walk. And that means that we are, at heart, irrational. We may follow a herd. We may follow buy and hold strategies. We may follow our biases. At the end of the day, we might do things quite differently. So, the market may be predictable, but the investor is not.

MONEM SALAM: So, we are talking about different kinds of bubbles and those kinds of things. I’ve been, now, in the market, long enough to have two examples at least. The dotcom and then the crash of 2008 in the Financial Crisis. And one of the things that I have done, as a prediction, is use what I call the “auntie factor.” Chris, you don’t know the auntie factor. It basically means that, you know, I’m sitting at a party and one of my mom’s friends—who, in the Muslim world, everybody’s friend of my parents are either auntie or uncle—so, they come up to me and they tell me, “You know son, I’ve started to invest in dotcom and it’s the only way to make money and I think you should do that, too.” So, I’ve seen that in the dotcom area, I’ve seen that in real estate in 2007, and I’m beginning to see that now in Bitcoin and also in electric vehicles. Those are the kind of behavior patterns that you come to when, you know, somebody like a Warren Buffet would say, “That’s when greed has taken over so you should be fearful,” right? And then at the same time, on the opposite of that would be, when people are like, “Oh, the last thing I’m ever going to do is invest in the stock market,” that’s when the fear behavior has taken over and that’s when Warren Buffet would tell you, “That’s the best time to be involved with the market.” So, a lot of our shareholders are business owners. What would you say to a business owner when it comes to their own businesses, whatever they’re trying to sell, and how to be able to apply Islamic behavioral finance from their own business?

DR. ZIYAAD MAHOMED: Islamic behavioral finance is really aligned to how we operate in our own businesses, very much so. So, what is it? It’s really that ethical integration of applying all our business practices. As you know and I’m sure the business owners know as well, the second Caliph Umar would prohibit anyone from entering the marketplace unless or until they knew the rules very well. And this was an instruction that was written outside the market. And he also implemented a supervisor, you know, Zainab [may Allah be pleased with her], and she actually went through the marketplace to ensure that everyone was following the rules. So, there’s a supervisor, a regulator, so to speak, so it’s very important—at the first level—that if we want to use Islamic behavior or bias... first of all, we must ensure that we integrate the highest level of ethics within our businesses. Now, at the first level, it’s easy because we need to remove what are the obvious prohibited elements. Islamic business practice looks at it from this perspective. It says, “Whatever you’re doing is permissible unless you can specifically identify the prohibited,” so it’s very easy. Whatever you’re doing is fine as long as you stay away from what’s not allowed. So, that means—and we know the obvious prohibitions: you stay away from the riba, the interest, the gharar, excessive speculation and uncertainty. And any forms of gambling. But anything that you’re selling but also be legitimate. And there’s a maxim that says, “What a Muslim is not allowed to consume or use, he’s not allowed to buy or sell.” A very simple maxim. So, if you’re not allowed to consume it, if you’re not allowed to use it, you can’t buy it nor can you sell it as a business owner. If you use these basic principles, you will find that you will have already instilled Islamic principles within your business. There’s a lot more to talk about and I’m not sure we have to go through all the details, but ethical practice means that, first of all, a very simple rule, “do not lie,” and it’s so simple to say do not lie and be an honest trader but really, in practice, it becomes quite challenging. And very often you walk into a store, and you say, “Well I’m not willing to pay this price,” and the store owner says, “This is my cost or I’m selling it to you below cost,” when in fact that’s not the truth. So, instill ethical practice by ensuring that you’re not lying and by not lying, saying that “Yes, this is my best price.” You don’t have to disclose your cost, but if you do, let it be the truth. If you want to disclose your cost. So, if you instill these basic behaviors within the business practice, already you are moving closer to an Islamically acceptable business practice.

MONEM SALAM: So, this idea that you just talked about is very similar to, basically, talking about full disclosure, right? Which is something that generally in investing, there is. The companies are forced by the regulators to fully disclose whatever it is that they’re doing so that the investor can make a rational decision. Is that the full disclosure you’re talking about there?

DR. ZIYAAD MAHOMED: It’s a slightly different scenario. Remember, a businessman does not have to provide full disclosure. But now, what does that mean? Full disclosure meaning that his busines secrets remain his own, where he acquired the product from remains his own, but what the ingredients of the product are, how he’s selling it... that is what must be transparent. Again, he does not have to disclosure his cost at any level, at any stage, so full disclosure that is required from an investment company is slightly different to a business because that will maintain what the business owner is using as his advantage to earn a profit and remain competitive. From an investment perspective, there is a fiduciary responsibility. There is a responsibility of trust and governance and therefore disclosure is required because there is a management of other people’s money. In a business, you’re selling a product and the product that you sell must be exactly the product that you have disclosed. This is the slight difference between investment disclosure and business disclosure.

MONEM SALAM: Thank you for that. One of my last questions that I have is really talking about... you’ve spent, mashallah, a lot of time in this field, but if there was a novice like myself who wanted to learn more about Islamic behavioral finance, what resources are out there that you would turn us to? To read up more about it.

DR. ZIYAAD MAHOMED: There isn’t much available, unfortunately. However, behavioral finance from the Islamic perspective can be understood by looking at, in fact, the practices of, you know, the pious predecessors, the scholars. An excellent book, although it may be regarded as a more traditional book, is really, Imam Al Ghazali, his magnum opus. It’s called Revival of the Religious Sciences. In that, he actually outlines an ethical life, what an ethical behavior should be. And when he actually lists these approaches and how we should live our lives... this practice is now referred to within commercial dealings, businesses, investments. And it pervades all life in the manner in which we practice. Naturally, the original sources of the Islamic law all talk about ethical behavior. We know that the Prophet Muhammad, allallahu alayhi wa salaam [prayers upon him and peace], has consistently talked about the importance of good behavior and he himself has said, “I have been sent to correct character or present good character.” So, this is a crucial aspect. To find resources on behavior is actually to find resources on what Islam expects from a Muslim in his behavior. 

CHRISTOPHER PATTON: The only place I want to go that we haven’t gone yet is kind of looking at the future of the field. You know, we’ve seen data harvesting and do we think that the field of behavioral finance will benefit from more and more data, data, data, all the time?

DR. ZIYAAD MAHOMED: This is the world that we are living in. Big data and data analytics really drives the process of behavioral finance today. It is no more that we take samples to determine how behavior is established. We actually take the entire population. When we take the entire population, we find that issues like error terms, etc., are reduced to completely negligible amounts and we can make a lot more predictive inputs into how that behavior has developed over time and will develop in the future. So, really, over the next few years, what we are probably going to see is an expansion of sentiment analysis. So, sentiment analysis is at the core of behavioral finance, but it has been used in a sample study structure. Going forward, we’re talking about sentiment analysis using big data. And now we are talking about a completely new field. I’m going to give you a quick example. You know, the driver of cryptocurrency prices that was found about two years ago... was that cryptocurrency was not driven as strongly by gold price or oil price or currency or political situation as much as it can be predicted by sentiment. A simple sentiment through Google analytics on all positive statements around particular cryptos would reveal whether they would increase or decrease in price in the coming weeks. And, you know, the analysis was so precise that it could say that, you know, within ten days, this crypto’s price will increase by 2.X% because the amount of positive sentiment over the last week has been X. And that positive sentiment is determined through different social media platforms because the positive sentiment on X media platform is stronger than Y, that will influence the crypto price more. So, this is where we are looking at behavior and sentiment analysis going forward and we expect that that will be driving our understanding of stock market prices, etc. but we must understand that there is one major variable and although we will be able to understand sentiment analysis a lot better and understand behavior a lot better, one major variable here is the fact that AI, as much as it is giving us answers on one side, is also making investment decisions on the other. So, that AI is predicting the behavior as well. So, it influences stock price and ultimately, perhaps, will create a balance. It will fill the gap. So, although we feel we may benefit in the short term, on predictive behavior through our sentiment analysis, we find the gap is filled very quickly because an AI decided to move funds, already, into that a lot quicker than we could have actually predicted. So, AI may be stabilizing the market and creating an efficient market going forward. This is what we think... well it’s rather a personal opinion. This is what I think will probably happen within the next three to four years at the very least.

MONEM SALAM: That’s a very interesting... you’re basically saying that the AI would be providing the equilibrium that doesn’t exist currently. It’s a fascinating thought.

CHRISTOPHER PATTON: So, we got our next episode topic, right?


DR. ZIYAAD MAHOMED: I just have one more thing to say.

MONEM SALAM: Of course.

DR. ZIYAAD MAHOMED: With regards to behavior and what could influence behavior. A very quick tool that investors, business owners, shareholders can use to determine, you know, whether they should invest or how to invest or, you know, looking at the overall market as a whole and investment biases. Now, I’ve been thinking about... what would be the most influential tool, from the Islamic perspective? And is it look for riba? Or is it looking for a gambling instrument or an impermissible product? That does not seem to be as strong as the tool I am going to suggest now, and that tool is gharar. So, we believe that gharar or uncertainty is the most powerful tool in managing investment decision making going forward. So, if we understand that, in a minute or two, what we are saying is although it’s one single word, gharar, which is even difficult to pronounce, it’s meaning can be rolled out into uncertainty, speculation, ambiguity in transactions, ignorance in information symmetry, and deception. So, when you look at that wholistically, what you’re saying is, whenever there is excessive speculation, you want to stay away from it. Whenever there is a high level of volatility, you want to stay away from it. You want to exercise caution. Whenever you have inadequate information and have not conducted sufficient fundamental analysis, you want to stay away from it. When you feel that there is a stock that is actually misrepresenting what it’s selling, and the manner in which it intends to develop or progress over the next few years, stay away from it. So, if you use this principle of gharar as a tool to drive your own behavior in making investment decisions, it should be adequate for the most part of good, positive, investment behavior from an Islamic perspective.

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