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CREATING A TWO-WAY MARKET VIA SHORT SELLING AND ITS POTENTIAL USE IN THE ISLAMIC PARADIGM

International Journal of Economics, Management and Accounting

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Title CREATING A TWO-WAY MARKET VIA SHORT SELLING AND ITS POTENTIAL USE IN THE ISLAMIC PARADIGM
 
Creator Mohamad, Azhar
 
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 elementof an efficient and complete market. For most Muslim scholars, however,short selling is deemed undesirable when read in conjunction with theHadÊth lÉ tabiÑ mÉ laysa Ñindaka, which carries a verbatim meaning of sellnot what is not with you. There are, however, alternative interpretations ofthis Hadith that may justify the use of covered short selling as one of thelegitimate instruments in the Islamic paradigm. Covered short selling,which entails borrowing a security for the purpose of shorting it, may beused efficiently to lower asset prices, as theorized by Miller (1977). Thispaper discusses about the short selling mechanism and argues that shortselling may be beneficial to consumers in an Islamic market as it creates atwo-way market mechanism and can be used to stabilize asset prices.
 
Publisher Kulliyyah of Economics and Management Sciences
 
Date 2013-12-31
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/244
 
Source International Journal of Economics, Management and Accounting; Vol 21 No 2 (2013)
2462-1420
 
Language eng
 
Relation http://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/244/175