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Risk and Returns of Shar??ah Compliant Stocks on the Karachi Stock Exchange: A CAPM and SCAPM Approach

Hanif, Muhammad, Iqbal, Abdullah, Shah, Zulfiqar (2016) Risk and Returns of Shar??ah Compliant Stocks on the Karachi Stock Exchange: A CAPM and SCAPM Approach. Journal of King Abdul Aziz University: Islamic Economics, 29 (2). pp. 37-54. ISSN 1658-4244. E-ISSN 7383-1018. (KAR id:59755)


This study documents the asset pricing mechanism of Shar??ah compliant securities listed on the the Karachi Stock Exchange. We select the CAPM market model to test for the impact in variations of stock returns on a sample of Shar??ah-compliant companies on ten years monthly data (2001-10). We first test the basic CAPM (Capital Asset Pricing Model) and its modified form known as the Shar??ah-compliant asset pricing model (SCAPM). We also analyse return differences due to size (market capitalization), book to market (B/M) value, price-earning ratio (PER), and cash-flow yield (CFY). Our results find a strong impact of the market index on stock returns (adj-R2 70%) and confirm the anomalies of size, B/M, CFY, and PER, while SCAPM is slightly better in explaining variations in cross-sectional stock returns.

Item Type: Article
Additional information: We gratefully acknowledge the Journal of King Abdulaziz University: Islamic Economics for the permission to upload published version of the paper here.
Uncontrolled keywords: CAPM, SCAPM, Shar??ah-compliant securities, size, book to market, cash flow yield, price earnings ratio, asset pricing
Subjects: H Social Sciences > HG Finance
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Abdullah Iqbal
Date Deposited: 22 Dec 2016 12:48 UTC
Last Modified: 06 Oct 2021 15:56 UTC
Resource URI: (The current URI for this page, for reference purposes)

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