Abstract
Shari’a compliant stocks are a recent development under Islamic finance, whereby stocks are screened through Shari’a compliance filters. This study is conducted to understand and document the important monetary factors contributing in determining stock prices of Shari’a compliant companies in Pakistan. Our sample includes all 97 non-financial Shari’a compliant companies screened by Al-Meezan Investment Management Ltd, based on accounting results of 2009. We have included ten macroeconomic variables in addition to market index in our study over a ten-year period (2001-10). We use JJ cointegration and OLS regression. Results identified the four important variables including interest rate, exchange rate, foreign direct investment and market index contributing in stock returns’ variations of Shari’a compliant securities. Evidence favors multifactor model for pricing of securities at KSE.
Highlights
Modern Islamic financial system was envisioned primarily for religious reasons., it has attracted markets beyond religious-following, on account of strengthsincludingContent from this work is copyrighted by Journal of Islamic Business and Management, which permits restricted commercial use, distribution and reproduction in any medium under a written permission
Stock market indexes are linked with macroeconomic indicators, especially; real sector activities are reflected at market-index movements, during the period under review
We investigated important macroeconomic variables integrated with stocks returns’ for conventional and Islamic indexes, in the Pakistani market, from 2011-16
Summary
Modern Islamic financial system was envisioned primarily for religious reasons., it has attracted markets beyond religious-following, on account of strengthsincludingContent from this work is copyrighted by Journal of Islamic Business and Management, which permits restricted commercial use, distribution and reproduction in any medium under a written permission. Modern Islamic financial system was envisioned primarily for religious reasons., it has attracted markets beyond religious-following, on account of strengthsincluding. Asset-based financing and socially responsible investingin the post-financial crisis era (200708). Sharı‘ah-compliant assets have grown at about 16% per annum from 2007-onward and are expected to cross the figure of US$5 trillion by 2020 (GIFR, 2015). Islamic banking and finance industry has been expanding worldwide with a promising future, given the customer base in billions with increasing incomes (Pew Research Center, 2011). Islamic financial system has been developing and expanding in Muslim-majority countries from the Far-East to the North-West Africa. The Middle Eastern region is the centre-stage of modern Islamic financial landscape (GIFR, 2015)
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