Return versus hype – Are Islamic metaverse companies more profitable than general ones – A Chinese stock analysis

Abstract

The metaverse, a virtual universe in which individuals and companies can interact, has become of paramount importance in China in recent years. While the metaverses are still in their infancy, there has been a growing interest and influx of capital into these universes. Shariah-compliant corporations have been gradually attracting significant funds from Islamic countries, given the growing strong engagement and trade. Similarly, metaverse corporations have been gaining significant sizes in the Chinese market and have become cornerstones of the investment landscape. For Islamic investors, questions arise whether these new metaverse corporations provide better returns given the massive hype and media attention they have attracted, and whether a portfolio investment into these corporations deliver the benefits promised. The article provides a comparative analysis between Chinese Islamic metaverse and Shariah-compliant enterprises, where all enterprises have either A or H-shares. The performance analysis over a timespan of 10 years demonstrates that the most optimal portfolios have similar expected returns while general Shariah-compliant enterprises provide significantly lower risks as compared to the metaverse ones. This implies that Shariah-compliant enterprises provide significantly more value for the risk they are attributed and are more sustainable.