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Are Islamic Stock Returns Predictable? A Global Perspective

Westerlund, Joakim LU ; Narayan, Paresh; Sharma, Susan and Phan, Dinh (2016) In Pacific Basin Finance Journal 40(A). p.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... (More)
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. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Islamic stocks, Predictability, Returns, Profits
in
Pacific Basin Finance Journal
volume
40
issue
A
pages
14 pages
publisher
Elsevier
external identifiers
  • scopus:84995754640
  • wos:000389092200014
ISSN
0927-538X
DOI
10.1016/j.pacfin.2016.08.008
language
English
LU publication?
yes
id
4003a0de-c9f4-4539-8982-c68720099bef
date added to LUP
2016-10-28 11:50:05
date last changed
2017-09-18 13:24:42
@article{4003a0de-c9f4-4539-8982-c68720099bef,
  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.},
  author       = {Westerlund, Joakim and Narayan, Paresh and Sharma, Susan and Phan, Dinh},
  issn         = {0927-538X},
  keyword      = {Islamic stocks,Predictability,Returns,Profits},
  language     = {eng},
  number       = {A},
  pages        = {210--223},
  publisher    = {Elsevier},
  series       = {Pacific Basin Finance Journal},
  title        = {Are Islamic Stock Returns Predictable? A Global Perspective},
  url          = {http://dx.doi.org/10.1016/j.pacfin.2016.08.008},
  volume       = {40},
  year         = {2016},
}