On Sharia’a-compliance, positive assortative matching, and return to investment banking

In their recent paper Derigs and Marzban (2009) argued thatSharia’a-compliant strategies result in much lower portfolio perfor-mance than the conventional strategies. The main reason for theirargument is of Sharia’a-compliance limits on the set of admissibleinvestments. However, in the world of imperfect financial marketssuch a limitation may also have some beneficial consequences. Wetherefore, assume that a net disadvantage caused by such limi-tations is relatively small, but is magnified by equilibrium hiringstrategies, which match Islamic banks with employees who have alower average level of human capital.