Shariah Compliant Capital Asset Pricing Model
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| 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.
| Author | : Shabir A. Hakim |
| Publisher | : |
| Total Pages | : 19 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
The prohibitions of ribā (interest) and trading in non-ḥalāl businesses in Islam redefines investment universe assumed by Capital Asset Pricing Model (CAPM). In Islamic investment world, risk-free asset and market portfolio with non-ḥalāl constituents are irrelevant. We propose two-versions of Sharīʻah-compliant CAPM that use Sharīʻah-complaint market portfolio and are free of risk-free asset. We test the proposed models together with conventional CAPM in Bursa Malaysia using three- and ten-year data. The test results of the models with three-year data reveal remarkable similarity between versions of Sharīʻah-compliant models. Besides, Sharīʻah-compliant CAPM is as capable of explaining returns on Sharīʻah-complaint stocks as conventional CAPM is of explaining returns on all stocks.
| Author | : Abubakar Javaid Dar |
| Publisher | : |
| Total Pages | : 14 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
CAPM is most widely used economic model for pricing of securities, although criticized on different basis and alternative CAPM's were developed in the hope of better explanatory power. Islamic finance has shown remarkable performance and growth in first decade of 21st century. In order to increase liquidity Islamic finance practitioners have entered in stock market and Islamic indexes operate worldwide. Risk free return is not accepted in Islamic financial literature hence traditional CAPM is not suitable for security valuation for Sharia compliant investments. Hanif (2011) presented a Sharia compliant asset pricing model (SCAPM) for valuation of Sharia compliant securities. The purpose of this study is to test the CAPM and SCAPM comparatively on KSE-100 to document the results and present findings as which of the model explain more variation in stock returns. Study period covers nine years (Jul 2001- Jun 2010). For calculation of returns historical prices of securities and market index is used. Portfolio technique (based on market capitalization) was used for analysis and results obtained through OLS. Findings of the study are very interesting to researchers as well. No significant results found in higher and lower capitalization portfolios under any of the model, however results were statistically significant for middle capitalization portfolio and explanatory power of SCAPM was better than CAPM.
| Author | : Muhammad Hanif |
| Publisher | : |
| Total Pages | : 28 |
| Release | : 2020 |
| Genre | : |
| ISBN | : |
Purpose: This study is intends to understand and document the impact of market-based -- market returns and momentum -- as well as firm-specific -- size, book to market ratio (B/M), price to earnings ratio (PER) and cash flow (CF) -- factors on pricing of Shari'a compliant securities as explanation of variations in stock returns in an emerging market -- Pakistan's Karachi Stock Exchange. Methodology: Initially, we test Fama and French (FF) three-factor model -- market risk premium, size, and B/M -- followed by modified FF model by including additional risk factors [PER, CF and momentum] over a ten year period (2001 to 2010). Findings: Our results support superiority of FF three-factor model over single-factor capital asset pricing model (CAPM). However, addition of further risk factors -- including PER, CF and momentum -- improve explanatory power of the model as well as refine the selection of risk factors. In our study CF, B/M and momentum factors remain insignificant. Traditional B/M factor in FF model is replaced by PER. Practical implications: Based on the modified FF model, we propose a stock valuation model for Shari'a compliant securities consisting of three factors: market returns, size, and earnings which explains 76% variations in cross sectional stock returns.Originality/Value: To the best of our knowledge, this is the first study (which combines market-based as well as fundamental factors) on pricing of Islamic securities and identification of risk factors in an emerging market -- Karachi Stock Exchange.
| Author | : Muhammad Hanif |
| Publisher | : |
| Total Pages | : 8 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Islamic finance has shown tremendous growth in last two decades. By the end of December 2008, in more than 50 countries approximately 300 institutions are operating and they manage funds of US $951 billion. As IFIs are entering into equity market for investment hence guidance in the field of security pricing is required. There is a need to analyze the existing security pricing models within the filter of Sharia compliance and suggest an alternative where required. This study is an attempt to analyze the technical asset pricing models (CAPM, APT and multifactor models) based on behavior of stock market and macroeconomic factors, test the validity through Sharia compliance filter and suggest modification if required. Findings suggest that existing technical asset pricing models are very much applicable under Sharia frame work with a minor modification of risk free return because under Islamic financial system risk free return does not exist. Traditional CAPM is convertible into SCAPM by eliminating risk free return and including inflation charge.
| Author | : John A. Sandwick |
| Publisher | : Edward Elgar Publishing |
| Total Pages | : 224 |
| Release | : 2021-03-26 |
| Genre | : Business & Economics |
| ISBN | : 1800378408 |
This original book examines how investment theory and regulatory constraints are linked to the professional processes of portfolio investments, and how the principles of Islam as defined by sharia fit into these processes. It also explores the measures required to create and grow a global Islamic asset management industry.
| Author | : Obiyathulla Ismath Bacha |
| Publisher | : John Wiley & Sons |
| Total Pages | : 389 |
| Release | : 2013-08-05 |
| Genre | : Business & Economics |
| ISBN | : 111846513X |
A comprehensive examination of Islamic capital markets Taking a comparative approach to the subject, this text looks at the similarities and differences between Islamic capital markets and conventional capital markets. The book explains each particular topic from both the conventional and the Islamic perspective, offering a full understanding of Islamic capital markets, processes, and instruments. In addition to a full explanation of Islamic products, this approach also ensures a holistic understanding of the dual markets within which Islamic capital markets operate. Ideal for both students and current practitioners, The New Islamic Capital Markets fills a large gap in the current literature on the subject. Whereas most books in this field cover the topic only superficially, this book offers the depth of coverage and academic rigor needed by professionals and serious students. Fills a gap in the current literature on the subject with comprehensive coverage and in-depth explanations Takes a comparative and holistic approach to the subject and features case studies from Malaysia, Indonesia, the Middle East, and Europe Written by a professor of finance at the International Centre for Education in Islamic Finance (INCEIF) One of the few comprehensive, dedicated guides to the subject available, The New Islamic Capital Markets offers a full understanding of the subject for students and professionals alike.
| Author | : Daniel Flaut |
| Publisher | : |
| Total Pages | : |
| Release | : 2020 |
| Genre | : Decision making |
| ISBN | : 9783030306601 |
This book explores several branches of the social sciences and their perspectives regarding their relations with decision-making processes: computer science, education, linguistics, sociology, and management. The decision-making process in social contexts is based on the analysis of sound alternatives using evaluative criteria. Therefore, this process is one that can be rational or irrational, and can be based on knowledge and/or beliefs. A decision-making process always produces a final decision, which may or may not imply prompt action, and increases the chances of choosing the best possible alternative. The book is divided into four main parts. The concepts covered in the first part, on computer science, explore how the rise of algorithms and the growth in computing power over the years can influence decision-making processes. In the second part, some traditional and innovative ideas and methods used in education are presented: compulsory schooling, inclusive schools, higher education, etc. In turn, the third part focuses on linguistics aspects, and examines how progress is manifested in language. The fourth part, on sociology, explores how society can be influenced by social norms, human interactions, culture, and religion. Management, regarded as a science of the decision-making process, is explored in the last part of this book. Selected organizations strategies, objectives and resources are presented, e.g., human resources, financial resources, and technological resources. The book gathers and presents, in a concise format, a broad range of aspects regarding the decision-making process in social contexts, making it a valuable and unique resource for the scientific community.
| Author | : Fara Madehah Ahmad Farid |
| Publisher | : Edinburgh University Press |
| Total Pages | : 200 |
| Release | : 2012-11-16 |
| Genre | : Religion |
| ISBN | : 0748655611 |
Shows you how Shari'ah theory is applied to the private equity industry and how this works in practice. Case studies and examples of business financial appraisals give an in-depth view of areas including: the Islamic banking industry; its use as a source of funding in the biotechnology industry, pharmaceuticals, ICT, agriculture and fisheries; and how it is used by investment companies as part of their asset management strategies.
| Author | : Ahcene Lahsasna |
| Publisher | : Springer |
| Total Pages | : 288 |
| Release | : 2018-09-15 |
| Genre | : Business & Economics |
| ISBN | : 331994262X |
This book focuses on forward lease sukuk, which is one of the most viable and dynamic Shari’ah-compliant instruments in the Islamic capital market. The idea of forward lease sukuk is to raise funds from non-existent assets whose subject matter does not exist at the time of the sukuk issuance. This book discusses the significant features of forward lease sukuk and demonstrates its vital contribution to project construction and manufacturing within the expanding field of Islamic finance.
