The role of real estate and gold as inflation hedges: the Islamic influence

Osman Gulseven*, Ozgun Ekici

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


Purpose: This paper aims to understand how aversion to interest income in Islam may influence the demand for real estate and gold when inflation is rampant. Design/methodology/approach: According to Markowitz’s mean-variance model, an optimal portfolio is one that blends maximum return with minimum variance. In investment portfolios, real estate and gold serve as inflation hedges. For religious reasons, many Muslims exclude interest-earning assets from their portfolios, however. This paper explores how this attitude influences the hedging role of real estate and gold when inflation is rampant. This paper compares optimal portfolios that include and do not include interest-earning assets. In the calculations, this study uses monthly Turkish data from 1997 until 2018. Findings: The analysis shows that the best hedging instrument against inflation is an interest-earning asset. In its absence, the role of real estate and gold as inflation hedges markedly increases: For a medium-return and medium-risk portfolio, for instance, the portfolio share of gold holdings increases from 3.16% to 58.43% and that for real estate increases from 14.97% to 24.06%. Originality/value: This paper is a pioneering work on the influence of Islam on the roles of real estate and gold as inflation hedges when inflation is rampant. It provides an explanation from financial theory for the strong real estate and gold demand in Turkey in the past two decades.

Original languageEnglish
Pages (from-to)391-408
Number of pages18
JournalInternational Journal of Islamic and Middle Eastern Finance and Management
Issue number2
Publication statusPublished - Apr 6 2021


  • Gold and Silver
  • Inflation and Indexation
  • Interest-Riba
  • Islamic finance
  • Portfolio optimization
  • Real Estate Market

ASJC Scopus subject areas

  • Business and International Management
  • Finance

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