Risk Measurement of Islamic Stock Market Indices with Islamic CAPM

Risk Measurement of Islamic Stock Market Indices with Islamic CAPM
Author: Merlind Weber
Publisher:
Total Pages:
Release: 2011
Genre:
ISBN:

The Islamic Capital Asset Pricing Model by Selim (2008) provides a theoretical framework for musharakah contracts, a form of profit-and-loss sharing investment, in order to assess the optimal portfolio choice of an Islamic investor. According to this theory, the beta-risk of an Islamic investment must be smaller than one. This hypothesis is tested using data of the Dow Jones Islamic indices of the European, the U.S., and the world market from 1996 to 2010. Applying the Conditional CAPM approach, the risk-return relationship of up- and down-market periods is estimated. The results reveal that the betas of all Islamic indices are smaller than one which is in line with Selim's theory. Additionally, a significant positive risk-return relationship during up-market periods and a negative relationship in down-market periods are observed.

Analysis of Islamic Stock Indices

Analysis of Islamic Stock Indices
Author: Ansarullah Ridwan Mohammed
Publisher:
Total Pages: 60
Release: 2009
Genre:
ISBN:

In this thesis, an attempt is made to build on the quantitative research in the field of Islamic Finance. Firstly, univariate modelling using special GARCH-type models is performed on both the FTSE All World and FTSE Shari'ah All World indices. The AR(1) + APARCH(1,1) model with standardized skewed student-t innovations provided the best overall fit and was the most successful at VaR modelling for long and short trading positions. A risk assessment is done using the Conditional Tail Expectation (CTE) risk measure which concluded that in short trading positions the FTSE Shari'ah All World index was riskier than the FTSE All World index but, in long trading positions the results were not conclusive as to which is riskier. Secondly, under the Markowitz model of risk and return the performance of Islamic equity is compared to conventional equity using various Dow Jones indices. The results indicated that even though the Islamic portfolio is relatively less diversified than the conventional portfolio, due to several investment restrictions, the Shari'ah screening process excluded various industries whose absence resulted in risk reduction. As a result, the Islamic portfolio provided a basket of stocks with special and favourable risk characteristics. Lastly, copulas are used to model the dependency structure between the filtered returns of the FTSE All World and FTSE Shari'ah All World indices after fitting the AR(1) + APARCH(1,1) model with standardized skewed student-t innovations. The t copula outperformed the others and a demonstration of forecasting using the copula-extended model is done.

Islamic Capital Markets

Islamic Capital Markets
Author: Nafis Alam
Publisher: Springer
Total Pages: 136
Release: 2016-07-26
Genre: Business & Economics
ISBN: 3319339915

This book addresses contemporary empirical issues in Islamic stock markets including volatility, efficiency and Sukuk defaults. The studies contained within this book consider a combination of pure Islamic stock markets and comparative studies, with reference to their conventional counterparts. The authors provide up-to-date, robust, accurate, reliable empirical enquiries addressing current issues of stock markets as well as providing up to date information and statistics to support future development and research. The book also covers a chapter on the current trends in research in Islamic capital markets, which analyses some recent and leading works to highlight and indicate the gaps in research that require further exploration. This book will be of value to all those who wish to gain a more thorough understanding of research in Islamic capital markets and the major topics in the field.

A Primer on Islamic Finance

A Primer on Islamic Finance
Author: Bala Shanmugam
Publisher: Research Foundation of the Institute of Chartered Financial Analysts
Total Pages: 121
Release: 2009
Genre: Banking law (Islamic law)
ISBN: 9781934667248

Shariah-Compliant Capital Asset Pricing Model

Shariah-Compliant Capital Asset Pricing Model
Author: Abdelkader Derbali
Publisher:
Total Pages:
Release: 2017
Genre:
ISBN:

The main objective of our paper is to propose a novel approach in pricing Islamic financial assets in accordance with shariah, advocated by contemporary investment theories of Markowitz's Mean-Variance Analysis and CAPM. The shariah-compliant Capital Asset Pricing Model that we developed with a few changing's of the traditional Capital Asset Pricing Model is integrating zakat, purification of return and exclusion of short sales. Then, we utilize a sample composed of 10 shariah-compliant public-listed companies in Bursa Malaysia. The empirical results find that the proposed Islamic CAPM is appropriate and applicable in investigating the linkage among risk and return in the Islamic stock market. Our investigation contributes to existing body of knowledge by presenting an algorithm and mathematical modeling of the shariah-compliant CAPM which has been lacking in the literature of Islamic finance.

Profiting from Principles? The Curious Case of Islamic Equity Indices

Profiting from Principles? The Curious Case of Islamic Equity Indices
Author: Hampus Adamsson
Publisher:
Total Pages: 42
Release: 2017
Genre:
ISBN:

Analysing the financial performance of Islamic equity indices from all relevant providers, we document these indices to outperform their conventional benchmarks on a global and developed market level after controlling for investment styles and a potential back-testing bias. To explain this outperformance puzzle, we investigate fundamental (ie risk factors), behavioural (ie Ramadan) and research design (ie sample length) related explanations but the overall results persist. When eliminating the effect of the financial services industry from conventional benchmarks, however, the outperformance of all indices except the Dow Jones Islamic Market (DJIM) world index disappears. This implies that Islamic equity indices have outperformed due to their critical position towards risk-free interest and the financial services industry. We conclude that they represent a viable alternative for risk-averse passive investors, especially during periods of high uncertainty around financial services and that further research is needed to fully understand the performance of the DJIM.

Islamic Financial Markets and Institutions

Islamic Financial Markets and Institutions
Author: Abul Hassan
Publisher: Taylor & Francis
Total Pages: 372
Release: 2022-08-12
Genre: Business & Economics
ISBN: 100063289X

The rapid pace of progress in the Islamic financial market and investment space, coupled with the COVID-19 pandemic and its aftermath and recovery, has provided the necessary challenges to build a strong case for Islamic investment. This timely and unique book focuses on the foundations of Islamic financial markets and institutions in the context of various products, their market application, Islamic asset management, and regulation. The authors provide a thorough overview of Islamic financing instruments and markets, such as Islamic debt and equity markets, through shares and the stock market, mutual funds, private equity, lease financing, Sukuk, green Sukuk, money market instruments, exchange-traded funds, cryptocurrencies, derivatives and so forth, which have emerged as alternative sources of financing. They offer insight into the numerous infrastructure institutions which have sprung up since the first decade of the new century, such as the Accounting and Auditing Organizations for Islamic Financial Institutions, Islamic Financial Services Board, Islamic International Rating Agency, and International Islamic Liquidity Management Corporation, as well as those being established, to satisfy different industry needs. With its uniquely competitive approach to the mainstream financial market, this book facilitates a greater understanding of the concept of Islamic investment. Through a discussion of the current state and future prospects of Islamic financial markets, the book's theoretical and practical approach offers academic, practitioners, researchers, students, and general readers a well-balanced overview of Islamic financial markets, its ethics, Shari’ah foundation, the instruments and operational mechanism used by Islamic capital, money, and debt markets.

Systemic Risk Contribution in Islamic Equity Markets

Systemic Risk Contribution in Islamic Equity Markets
Author: Sana Braiek
Publisher:
Total Pages: 14
Release: 2018
Genre:
ISBN:

The main challenge by the study of systemic risk is the measurement of contagion that enables the impact of external movement in one market on other markets. One of the main tools that has been proposed for this purpose is the risk measure ∆CoVaR of Adrian and Brunnermeier (2011). This study explore the systemic risk profile of Islamic equity Markets based on CoVaR, ∆CoVaR and quantile regressions. We empirically investigate the systemic risk contributions of 10 Islamic Dow Jones sector equity indexes covering 15 years of daily data in the U.S stock Market. Evidences show that Industrial and Technology sectors contributing the most to systemic risk in the US. Furthermore, we confirm that the Oil & Gas and Technology sectors were the most exposed to systemic risk and hence a larger risk spillover in distressed period.

An Empirical Assessment of Islamic Index

An Empirical Assessment of Islamic Index
Author: Khalid Ul Islam
Publisher:
Total Pages: 9
Release: 2016
Genre:
ISBN:

To meet the mounting demand for Shariah Compliant Investment Avenues in equity markets, hundreds of Islamic Indices have been launched world over. Dow Jones and FTSE Global were the first to launch the Shariah Compliant Index namely DJIMI and FTSE Global Islamic Index Series (GIIS). While a number of Shariah compliant Indices have been launched by different publishers like S&P, MSCI, FTSE, Dow Jones and Russell to meet the growing demand but a very few studies have been conducted to assess the performance of these indices in comparison to their counterpart indices in terms of their risk and return. The present study has been undertaken to assess and compare the performance of S&P BSE 500 Shariah and S&P BSE 500 for five years time period i.e., June 2009 to May 2014. To assess the performance of these indices, average monthly raw returns, risk adjusted monthly returns were calculated using time series data of daily closing prices. An attempt has also been made to analyze the risk involved Beta and Alpha has been used. The study also investigates the long term relationship between Islamic Index and its counterpart. The study has revealed that S&P BSE 500 Shariah Index has slightly underperformed the conventional index during the period under study on the basis of monthly returns. However, the Islamic Index was found to be far less risky than its counterpart Index. Also the two Indices were cointegrated and exhibited long term relationship.

Portfolio Volatility of Islamic and Conventional Stock

Portfolio Volatility of Islamic and Conventional Stock
Author: Aldrin Herwany
Publisher:
Total Pages: 36
Release: 2013
Genre:
ISBN:

Conventional finance suggests that the higher the risk of an investment, the higher the return it should give. Nevertheless, whether Islamic stocks that offer alternative investment in the stock market suggest different risk-return relationship still needs to be investigated. This empirical study is aimed at assessing risk-return behavior of Islamic stocks. This study employs cross sectional data of portfolio developed using beta-rank and market capitalization, in which daily data will better reflect the real volatility. This study also measures volatility of both conventional and Islamic stocks using Value-at-Risk (VaR). To check whether Islamic stocks are immune from any impact of financial crisis, this study utilizes three periods of observation, i.e., before, during and after the 2008 crisis. This study assesses risk and return using Multi-index model, in which variables tested are the respective fundamental factors. Results of this study will provide more accurate approach in Islamic stocks analysis.