Selling Short as Ijarāh with Istiḥsān and Its Ethical Implication


For most scholars, the concept of selling short, where financial assets are sold without prior possession or ownership, transgresses Islamic principles. However, the Sharīʿah Advisory Council of the Securities Commission of Malaysia (SAC) went against the majority by permitting short selling in 2006. Conventional finance points out that short selling increases liquidity, facilitates price discovery, and enables informational efficiency. Muslim scholars are facing a dilemma: on the one hand, Sharīʿah principles dictate that Islamic capital market transactions and instruments should remain devoid of elements of ambiguity and prohibited characteristics, but on the other hand, the Sharīʿah also demands that the transactions be of social utility to the participating parties. It appears that the SAC allows regulated short selling on the basis of ijārah with istiḥsān. This article strives to highlight the jurisprudential issues regarding short selling and contribute to an Islamic angle on the ethical implications affecting this phenomenon.


Authors: Imtiaz Mohammad Sifat and Azhar Mohamad
Source: Arab Law Quarterly, Volume 30, Issue 4, pages 357 – 377

Publication Year: 2016
DOI: 10.1163/15730255-12341324
ISSN: 0268-0556 E-ISSN: 1573-0255
Document Type: Research Article
Keywords: fiqh; short selling; ijārah; Islamic finance; regulation

For queries regarding this research article (e.g., access to full version, clarifications, complaints, suggestions, etc.) feel free to send an e-mail to This article is published by Arab Law Quarterly (Brill Publishers). 



Post-Positivism and Research Philosophy

The following is a paper I wrote for a Qualitative Research Methodology course. Somehow, the paper appears to be circulating without proper attribution. Therefore, I’m publishing it here so that web spiders like Google and Bing can read+archive it and identify me as its first (original) publisher.


The discourse of research paradigms pertains to philosophical dimensions of science. The main drivers of philosophical dimensions girding scientific research are epistemology and ontology (Kalof, Dan, and Dietz, 2008). Epistemology is lexically the science of knowledge. It denotes the beliefs en route to creation of knowledge deemed to be acceptable, reliable, and valid. Ontology refers to how an individual perceives reality. Neuman (2011) extends the dimensions to axiology (values espoused by researcher and relation to research) and methodology (model behind research process). Ontologically, I am an objectivist. I believe reality endures disparately from human thoughts and beliefs. It, however, needs to be interpreted through social conditioning. As for epistemology, I maintain that only observable phenomena can supply credible data and facts that lead to knowledge. This information, only when explained through context(s), can become admissible to realm of knowledge. My axiological beliefs are value laden and etic centered. I admit my biases as a researcher owing to my imperfect world views, upbringing, and unique experiences. Though my methodological leanings slant heavily toward quantitative (to enable erklaren), my probabilistic perception of reality makes me apprehend multiplicative approaches for research. Thus, I recognize the need to incorporate qualitative methods and triangulation through many sources (to enable verstehen).

Having confessed these positions, it is doubtless to research practitioners that I belong to the post-positivist camp. Having a comprehensive educational and professional background in finance, my partial inclinations to the now derided logical positivism paradigm is expected. After all, research in finance, typified by number crunching, is dominated by positivists. Preponderant strands of numerical studies comprise the bulk of mainstream finance (and business schools, arguably) research with brute objectivism and hypothetico-deductive analysis of large archival data to explain and/or predict social phenomena. My conversion from logical positivism to post-positivism is a conscious metaphysical commitment after surveying pros and cons of post-positivism. In this paper, I shall chronicle my perceived strengths and demerits of post-positivism and thereby defend my philosophical stances and paradigm.

Early Ghosts of Positivism

The tradition of social inquiry is rooted in emulation of logical empiricist foundations of natural sciences that promulgate a theory of knowledge to explain concepts and methods of natural world. When applied in social spheres, positivism resulted in persistent pursuit of quantitative and replicable causal generalizations. This is done through empirical research designs, sampling techniques, data collection procedures, quantification of results, and generation of causal models that can predict future phenomena (Fernbach and Orb, 2013). In fields of finance and economics, this is demonstrated through experimental designs, regression analyses, surveys, input-output researches, cost-benefit analysis, operational management, mathematic simulation and cybernetic models, systems analyses, etc (Hoos, 1983; Stock, 1997; Vemuri, 2014). The underlying assumptions of these methodological commitments are formed by the dogma that in order for social sciences to qualify as knowledge causal knowledge has to be generated empirically in social laboratories by researchers of value-neutral axiology. This reduces complex social phenomena of normative implications to mere technical variables. Stimulated by enormous computing powers, information technology revolution since late 1990s, and proliferation of high speed communication, earlier flag bearers of social sciences succeeded in ossification of logical positivism epistemology while burying the concept of context in social sciences.

Though I don’t profess post-positivism to be the be-all end-all elixir of predicaments in social science research, I am fascinated by its historical roots in natural sciences (Green, Franquiz and Dixon, 1997). As quantum mechanics and chaos theory revolutionized understanding of physicists and evolution did the same to biology, more and more natural scientists abandoned Parmenidean worldview and embraced Heraclitean conception of Flux (Capra, 1996; Toulmin and Toulmin, 1992; Weinert, 2013). The indeterminacy of quantum mechanics teaches us that numerous layers of atomic reality are co-determined by other aspects of same phenomena to such a huge extent that those processes can no longer be considered predictable. Gallison (1997) and Walker (2000) claim this understanding of particles leads many physicists to believe that how a particle behaves depends on the vantage point from where it is shed light upon. Thus, in natural science world now context matters. Similar participatory intermingling is observed in chaos theory which imports subjectivity (Van den Hove, 2007). These developments dealt big blows to epistemological anchors of logical empiricism. In fact, historians of research have documented the large extent to which science is as much a sociocultural venture as a technical exercise (Barry, 1996). Findings of science have always found meaning when contextualized through symbolic means (Caldwell, 2013). Therefore, what we deem to be knowledge is essentially scientific accounts interpreted through explanations of a community of researchers at a particular time and space, which itself emerges out of historical and linguistic interplay of conjecture and refutation (Chalmers, 2013).

My disillusionment with cemented preconceptions of natural sciences led me to reconsider my approach to normative philosophical underpinnings of research. I revised myself to now require careful appraisal of empirical data through practical judgments that shape the researcher, research object, and research instrument(s). I subscribe to Natter, Schatzki and Jones’s (1995) assertion that science is an interpretation of an object; not the object itself. Now I shall describe aspects of post-positivism that appeal to me the most followed by some of its limitations.

Strength: Counter-Expertise

The ideals of concrete objectivity by positivists and convenient multiple reality of interpretivists are easy targets for refutations because of inability of both paradigms in reaching consensus. No matter how rational the epistemology and ontology, both paradigms can’t deny the interpretive nature of a social object and the subjectivist meaning assigned to its empirical findings. Anyone with an intent to disagree with a study’s conclusions can do so by disputing the social and technical interpretations and assumptions imbedded in study design, instrumentation, or practice. This is not honest. Similar to “paradigm wars” this phenomenon results in contentious bickering over same results. The best example of this is the so-called dissensus over global warming in environmental and geo-sciences. Fischer (1995) dubs this the politics of counter-expertise, where researchers of divergent camps use same findings to construct opposing narratives through cherry-picking and self-styled interpretation of evidences. Post-positivism offers a fresh perspective here through acknowledgement of such built-in partiality. Through recognition of reality as a social construction, its focus transfers to circumstantial context and discursive process to shape the narrative.

Strength: Coherence

The focus of post-positivism is not on the reality itself but the scientific account of it. This should, however, not be mistaken as conflation of the two. I still maintain that real and separate objects of inquiry exist independent of the researcher. Rather, it is human vocabulary and concepts constructed by us that ascribes meanings to the empirical findings. I am doubtless influenced by my philosophical framework, educational track record, skill-set, experience, cultural and perceptual inclinations, etc. Post-positivism morphs these diverse cognitive elements to discursively formulate new knowledge. This is rooted in the “coherence” theory of reality which incorporates the limited and temporally bounded nature of knowledge (Stockman, 2013). The contradiction of coherence theory to logical empiricism’s mainstay “correspondence theory” is appealing because whereas positivism treats scientific concepts as direct antecedents of reality, coherence theory acknowledges the indeterminacy of empirical proposition. Alexander and Colomy (1992) attribute this approach to searching for a range and scope of interpretive perspectives that are merited. Personally, I am attracted to this approach of pursuing a family of answers that are objectively robust and yet possess interpretational diversity and validity. As such, I enjoy the spectrum of method choices: quantitative analysis, historical, comparative, phenomenological modes, etc. Although quantitative analysis remains at the forefront of theory construction, it no long is the solitary king.

Strength: Learned Conversation

Inspired by the Socratic way, I hold the view that acceptable knowledge in social phenomena should emerge from discursive interaction or dialectical clash of rival interpretations. I detest logical empiricists’ notion of consensus that is tethered to inductive reproduction of empiric tests and statistical confirmation (Jones and Mcbeth, 2010). Post-positivism’s allure lies in filtering empirical data through other perspectives of conflicting frameworks. This minimizes needless debate over the data itself and stimulates debate over meaning imparted to data. This conforms to Toulmin’s idealized process of “learned conversation”, articulated in his 1996 paper on rationality and reasonableness.

Strength: Multimethodological Elasticity and Rigor

It will not be an understatement to claim the rhetorical authority of science in 21st century has far surpassed the privilege once enjoyed by religion. Ironically, yet, scientific knowledge still suffers from logical empiricist pre-conceptions rather than being consensually accepted belief of scientists (Campbell and Paller, 1989). On the other end of paradigm spectrum, constructivists’ neglect of proof and demonstration is a conversation stopper. Post-positivism treats the construction of knowledge as a fission reaction of socio-technical judgments forged by researchers in different time and space. Theories arising from this paradigm therefore boasts a capacity to establish discursive connections and contrive equivalences between otherwise disparate elements, while infusing new components. Such rigor is often facilitated through use of multimethodological approach to employ subtler and intricate robustness of empirical interpretation. Empirical rigor–usually for positivists–is confined to narrow aspects of technical design of research and statistical analyses. Post-positivism’s acceptance of multimethodological spectrum enables cumulative trutination of evidences and arguments that are otherwise too rich to be captured by inductive or deductive logic alone (Collins, 1985). This deliberative framework of reasoning is a departure from classical modes of reasoning, held inadequate by post-positivism for misleading many accounts of practical and academic reasoning.

The one-size-fits-all philosophy of positivism that applies equally concerning the kitchen to the surgery to the theatre to the financial market to the nuclear bomb is a dazzling indictment of itself. I am particularly impressed by Post-positivism’s embrace of informal logic with independent rules and procedures in pursuit of an alternative methodological framework–reminiscent of Aristotle’s conception of Phronesis. It is attractive for its ability to remedy the incompleteness and imprecision of existing knowledge and reconceptualization of human understanding of evidence and verification in social research that has been maltreated by formal logics (Scriven, 1987). While positivism extols formal logic as only pathway to reality, Toulmin excoriates this approach for its impracticality and utter disregard for context or subject matter. A method fit for clinical medicine or maritime law isn’t necessarily apposite for trigonometry or forensic accounting. Post-positivism appears to bypass this absurdity by expanding the scope of reasoned argmentation by espousing practical reason to erect a framework from multimethodological perspective.

Strength: Pluralism

I concur with post-positivists’ pluralistic contention that dichotomous approbation of quantitative and qualitative methodologies don’t reflect a clash of philosophies. In fact, the complementariness of pluralism elevates credibility of research. This beautiful rapprochement is tenable only with post-positivistic assumptions which acknowledge concurrent significance of inter-subjectivity of social actors (contingency of verstehen) and probability of external causal behaviors inducing such phenomena (enabling erklaren). McLennan (1995) remarks on pluralists’ affinity for qualitative methods to satisfy the commitment to exploration of inter-subjectivity within the framework of variable analysis (Blumer, 1969) which deploys quantitative methods.

Strength: Transcendence and Metaphysics

Post-positivists’ approach to social phenomena is both scientific and transcendental, treating the world as ‘structured, differentiated, and changing,’ while conceding the frailty of humans in fully understanding the social world through identification of operating structures which generate events and phenomena warranting researchers’ attention (Bhaskar, 1989; Craig and Bigby, 2015). The external reality of abstract matters, through created by humans, is autonomous (Magee, 1985). Logical empiricism’s professed single and concrete reality and its polar opposite interpretivism’s infinite realities is both perturbing. Post-positivism’s median ground is not merely a symbolic reconciliation of the two extremes. It is also ontologically the most appetizing to a votary of mind-independent reality with the caveat of possible multitude perceptions. Though I believe this reality can’t entirely be captured perfectly, post-positivist paradigm allow us a certain degree of plasticity (Churchland, 1979) in distinguishing between objective reality and actors’ perceptions of reality. This is unlike interpretivists or critical theorists who are constrained by dependence on historical explanations or dogmatic theoretical frameworks.

Weakness: Complexity

The vast swathes of phenomena and experiences that shape human realms, post-positivist reliance on isolation and correlation of a handful of variables (albeit accounting for context) is still tenuous. Since majority of data is inconclusive, giving meaning to it is difficult considering the technical necessity to fulfill an if-then hypothesis in a hypothetico-deductive framework. Though this problem is more circular for positivists, post-positivism too suffers from lack of prediction and generalization when navigating through an untested theory. Let’s be honest. No theory is fully tested. Even a fervent application of Popper’s falsification principle can’t rescue post-positivism by generating air-tight generalizable theories.

Weakness: Hegemony of Scientific Community

A by-product of falsification folly, the conduct of scientific community itself isn’t congenial to advancement of social science research towards practical relevance. Together with positivists, post-positivists too are partly culpable since these two paradigms dominate the research funding, publication, and policy institutive communities. As a result, the ideal scenario of critical and non-dogmatic surveillance of empirical propositions hasn’t materialized. Rouse (1987) points out that the historical survey of scientific community’s practice appears resistant to denounce or reject ossified but discredited propositions. Ranging from Dmitri Mendeleev’s near prophetic formulation of Periodic Table in Chemistry to revision of Newtonian Physics to stubborn insistence on CAPM model in managerial finance exemplify the obstinacy of scientific community to reject specific theories. Post-positivism hasn’t done enough to redress this dogmatic attitude of scientific community, of which it itself is an influential wing.

Reflections on Writer’s PhD. Journey

Being exposed to company of peers whom now I recognize to be unconscious supporters of instrumental rationality, I too was at the outset skeptical of reflection on philosophical underpinnings of conducting a research and the concomitant grave implications on validity and reliability of its resultant “knowledge creation.” After careful introspection, I realize that my considered decision to conduct a quantitative study examining existence of magnet or repellant effect of circuit breakers in Bursa Malaysia fits perfectly with post-positivist treatment of financial markets’ pricing mechanism, which is understood as a scientific continuum ranging from abstract, general, or metaphysical by some experts (notably proponents of behavioral economists such as Thaler, Kahneman, Tversky, or Evonomics expert Elinor Nostrom); whereas their positivist opponents treat the matter strictly as concretely factual and empirical (such as Boehmer and Zhang, Subrahmanyam, Chordia, Anderssen and Bollerslev). Moreover, my proposed contribution in exploring magnet effect of trading halts should contribute to social scientific debates on price discovery signals of markets by inviting an open and un-coerced debate in true post-positivist spirit. My wholesale dependence on statistical instrumentation will not detract inductive discussion of findings because I recognize the discursive nature of scientific discourse. Though my study’s professed goal is to replicate and assess generalizability, the apex goal is not to settle once and for all the debate whether price limits are rational or not. I aim merely to empirically contribute valid and reliable findings which assist scientific communities to guide policy makers as “disinterested” etic scientists to formulate actions. Lastly, in defense of my quantitative dependence to investigate the matter, I find little to no empirical or logically compelling theoretical basis to incorporate interpretive methodology to understand pricing mechanism. This is a domain of brute price signals: flashy stock exchange switchboards of prices scrolling across the screen, terabytes of tick data and order book logs. I do, however, concede behavioral economists have every right to commence interpretive methodologies to unravel psychological and behavioral incentives of market players to understand to what extent their actions are influenced by regulatory interference. If Allah permits, I intend to engage in such an endeavor in future.

Parting Remarks

A paradigm is how a researcher understands the nature of existence. It is metaphysical to an extent that transcends logic and rationality. Thus debates on which assumptions are rational itself can be self-defeating. I agree with Lincoln and Guba’s (1985) claim that each paradigm is rational within its own constructed logic. I am also convinced by their position that philosophical assumptions themselves can be tested neither logically nor empirically. They prolong the practical implications of this claim to ensuring congruency of assumptions to determine how appropriately the research process fits the perceived values of researcher and stakeholders of research projects. However, I vehemently denounce Lincoln, Lynham, and Guba’s (2011) proclamations that “objectivity is a chimera: a mythological creature that never existed, save in the imaginations of those who believe that knowing can be separated from the knower.”

Compared to meteoric success of its natural cousins, social science has empirically by and large failed massively (Giddens, 1995; Thomas, 2013; Machlup, 2014; Weber, 2015). The paucity of predictive power in social science models is only matched by its incapacity to solve pressing socio-economic troubles of world citizens. This plague affects my own area of specialization: business and finance. Despite plethora of researches done from business schools (admittedly from positivist assumptions) the impact of these studies are nugatory for industry practitioners. Porter and McKibbin (1988) point out that business world generally ignores business school researches. In fact, many upper level managers and executives pay nearly zero attention to research and findings of business academics. In recent times, the irrelevance of research output by economics and finance academics has been noted by Tapp (2004), who reviewed acclaim of academic research in Britain, France, and Germany. Post-positivists impute this failure to incompetence of social sciences to generate usable knowledge (Fischer, 1995) and to prevent endless studies gathering dust in file cabinets (Lindbolm, 1990; Fischer, 1998). The zeitgeist of scientific research is geared toward settling debates instead of stimulating discussion. Fischer (1998) claims this narrow-minded culture emanates from narrow methodological perspective of paradigmatic bigotry which hinders new knowledge’s prospects of real impact in the world. Post-positivism is an attempt at scientific revision by diverging from traditional positivist dependence on scientific proof and verification toward discursive and contextual understanding of social phenomena (Vo and Christie, 2015).


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Raising a Bias-Proof Generation: Advocating Reform in Malaysian Business School Curriculum in Light of Advances in Behavioral-Neuro Economics and Finance


Unbeknownst to us, we(humans) possess biases and idiosyncratic interpretations that shape our judgments and ideals. Ergo, humans take for granted that other social participants will appreciate their judgments. When this preconceived notion is betrayed by reality, people’s certitude of objectivity forces them to perceive others as biased or unfair. Such cognitive biases can prove costly in hands of individuals at a micro-level and decision-makers at a macro-level. Recent global financial crises indicate that even regulators and policy-makers aren’t immune from self-serving biases that downplay own dispositional biases. If and when left unchecked, cognitive biases threaten a huge waste of efforts and economic resources. At this juncture of 21st century, overwhelming empirical and theoretical literature underscore the deviation of financial markets and human decision making process from the basic assumptions underlying traditional economics finance paradigm that has pervaded since the mid-1900s. Ranging from applying bounded rationality to economic models to Kahneman’s application of prospect theory to economics and financial markets, designers of business school curricula have now access to a smörgåsbord of literature addressing the inescapable issue of cognitive biases. Specifically, for economics and finance professors, this distinction of cognitive (in)coherences and their recognition should be inculcated subliminally in introductory 1st year level courses, and later on progressively through purposive behavioral-neuro economics/finance courses. In this paper, we argue that such bias-proofing redesign promises aiding students in superior decision making, assessing risk, and minimizing biases. After surveying the curricular praxis in Malaysian business schools, we draw attention to the attractive adaptive market hypothesis (AMH), which promises an exciting infusion of the legacy of EMH model, bounded rationality, evolutionary biology, neuroscience and psychology. This article is a plea for reform in light of nascent advances in behavioral/neuro economics and finance.