Are Islamic stock returns predictable? A global perspective

Paresh Kumar Narayan, Dinh Phan (), Susan Sharma and Joakim Westerlund

Pacific-Basin Finance Journal, 2016, vol. 40, issue PA, 210-223

Abstract: Using the sharia-compliant measures, we compile a data set that spans January 1981 to December 2014 and contains 2577 Islamic stocks. Using as many as 12 financial and macroeconomic predictors, we discover strong evidence of both in-sample and out-of-sample return predictability. There is robust evidence of predictability only when U.S. stock returns are used as a predictor. We find that investing in regional (industry) portfolios offers on average, across the 12 predictors, meaningful profits of 6.16% (6.03%) per annum. Investing in a portfolio of Islamic stocks belonging to emerging markets (9.89% per annum) and a portfolio of Islamic stocks belonging to the consumer goods sector (6.37% per annum) offers the most returns amongst regions and industries, respectively.

Keywords: Islamic stocks; Predictability; Returns; Profits (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (55)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:40:y:2016:i:pa:p:210-223

DOI: 10.1016/j.pacfin.2016.08.008

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