Shariah-compliant capital asset pricing model: New mathematical modeling

Abdelkader Derbali (), Abderrazek Khaldi () and Fathi Jouini ()
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Abdelkader Derbali: Institut Supérieur de Gestion Sousse
Abderrazek Khaldi: Université de Sousse

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Abstract: The main objective of our paper is to propose a novel approach in pricing Islamic financial assets in accordance to 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 amongst risk and return in the Islamic stock market. Our investigation contributes to existing body of knowledge by presenting an algorithm and mathematical modelling of the shariah-compliant CAPM which has been lacking in the literature of Islamic finance.

Keywords: CAPM; shariah; Islamic finance; zakat; purification (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-isf and nep-sea
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Published in Journal of Asset Management, 2017, 18 (7), pp.527 - 537. ⟨10.1057/s41260-017-0051-x⟩

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Journal Article: Shariah-compliant Capital Asset Pricing Model: new mathematical modeling (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01695996

DOI: 10.1057/s41260-017-0051-x

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