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Shariah-compliant capital asset pricing model: New mathematical modeling

Author

Listed:
  • Abdelkader Derbali

    (Institut Supérieur de Gestion Sousse)

  • Abderrazek El Khaldi

    (Université de Sousse)

  • Fathi Jouini

    (Université de Sousse)

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.

Suggested Citation

  • Abdelkader Derbali & Abderrazek El Khaldi & Fathi Jouini, 2017. "Shariah-compliant capital asset pricing model: New mathematical modeling," Post-Print hal-01695996, HAL.
    • Handle: RePEc:hal:journl:hal-01695996
    DOI: 10.1057/s41260-017-0051-x
    Note: View the original document on HAL open archive server: https://hal.science/hal-01695996
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    References listed on IDEAS

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    Cited by:

    1. Ahmad Faisol & Sulaeman Rahman Nidar & Aldrin Herwany, 2022. "The Analysis of Risk and Return Using Sharia Compliance Assets Pricing Model with Profit-Sharing Approach (Mudharabah) in Energy Sector Company in Indonesia," JRFM, MDPI, vol. 15(10), pages 1-14, September.
    2. Jardine A. Husman & Ali Sakti & Dahnila Dahlan & Imam Wahyudi Indrawan & Zaäfri A. Husodo & Nur Dhani Hendranastiti & Muhammad Budi Prasetyo & Wahyu Jatmiko, 2022. "On The Development Of The Islamic Benchmark Rate: An Indonesian Case," Working Papers WP/04/2022, Bank Indonesia.

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    Keywords

    CAPM; shariah; Islamic finance; zakat; purification;
    All these keywords.

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