scholarly journals Measuring Islamic Stock Performance in Indonesia with A Modified Sharpe Ratio

2021 ◽  
Vol 10 (2) ◽  
pp. 155
Author(s):  
Mohammad Farhan Qudratullah
Keyword(s):  
Standard Deviation ◽  
Asset Pricing ◽  
Interest Rates ◽  
Value At Risk ◽  
Sharpe Ratio ◽  
Islamic Finance ◽  
Pricing Model ◽  
Stock Performance ◽  
Asset Pricing Model ◽  
The Interest Rate

Since the late 1960s, one of the stock performance analysis tools commonly used is Sharpe Ratio. The Sharpe Ratio consists of three components, namely stock return, risk-free returns, and stock risk. Many studies approach risk-free returns with interest rates, including when measuring the performance of Islamic stocks, while interest rates are prohibited in the concept of Islamic finance. Moreover, the stock risk is measured by a standard deviation which assumes returns are normally distributed, while many stock returns are non-normally distributed. This paper intends to measure the performance of Islamic stocks listed on the Indonesian Stock Exchange (IDX) for the period of January 2011 to July 2018 using a modified Sharpe Ratio. The ratio is modified by replacing the interest rate with four approaches: eliminating the interest rate, changing with zakah rates, changing with inflation, changing with the nominal gross domestic product, and replacing the risk measurement from Standard Deviation to Value at Risk (VaR). The findings provide almost the same results as the original measurement and thus, show very high suitability for using these models in other circumstances. Therefore, on the concept of Islamic finance, risk-free returns can be measured using these four approaches, especially inflation and GDP. This study also recommends inflation and GDP to measure risk-free returns in the Sharia's Compliant Asset Pricing Model (SCAPM) or Islamic Capital Asset Pricing Model (ICAPM).====================================================================================================ABSTRAK – Pengukuran Kinerja Saham Syariah di Indonesia menggunakan Sharpe Ratio Modifikasi. Sejak akhir 1960-an, salah satu alat mengukur kinerja saham yang biasa digunakan adalah Sharpe Ratio. Model Sharpe Ratio terdiri atas tiga komponen, yaitu return saham, return bebas risiko, dan risiko saham. Return bebas risiko diukur mengunakan variabel suku bunga yang digolongkan riba dan dilarang dalam konsep keuangan islam. Sedangkan risiko saham diukur dengan standar deviasi yang mengasumsikan data berdistribusi normal. Paper ini bertujuan untuk mengukur kinerja saham syariah yang terdaftar pada Bursa Efek Indonesia (BEI) untuk periode Januari 2011 sampai Juli 2018 dengan menggunakan Sharpe Ratio modifikasi. Kajian akan memodifikasi model Sharpe Ratio dengan mencari variabel alternatif penganti suku bunga dengan empat pendekatan, yaitu: menghilangkan variabel suku bunga tersebut, mengganti dengan zakat rate, mengganti dengan inflasi, dan mengganti dengan produk domestik bruto, serta mengganti standar deviasi dengan Value at Risk (VaR) sebagai pengukur risiko saham yang selanjutnya diimplementasikan pada pasar modal syariah di Indonesia periode Januari 2011 - Juli 2018. Hasil kajian menunjukkan kesesuaian yang sangat tinggi untuk hasil pengukuran kelima model tersebut. Dilihat dari kedekatan hasil pengukuran kinerja, kelima model tersebut dapat dikelompokkan menjadi dua, yaitu model dengan tingkat suku bunga, inflasi, dan PDB sebagai kelompok pertama, sedangkan model tanpa suku bunga dan tingkat zakat sebagai kelompok kedua 

scholarly journals Zakah Rate In Islamic Stock Performance Models: Evidence From Indonesia

2020 ◽  
Vol 13 (1) ◽  
pp. 107
Author(s):  
Mohammad Farhan Qudratullah
Keyword(s):  
Interest Rates ◽  
Capital Market ◽  
Sharpe Ratio ◽  
Islamic Finance ◽  
Performance Models ◽  
Stock Performance ◽  
Very High

<p>There are three models commonly used to measure the performance of Islamicstocks, named Treynor Ratio, Sharpe Ratio, and Jansen Index. One component of the three models is risk-free returns which are usually approached with interest rates, whereas interest rates are prohibited in the concept of Islamic finance. This paper will approach a risk-free return with zakat-rate on the Islamic capital market in Indonesia from January 2011 - July 2018, then compare it with a model that uses interest rates. The results obtained by the model with interest rates and zakah-rate in this third model have very high suitability values, so that zakah-rate can be used as an alternative substitute for interest rates in measuring the Islamic stock performance. Beside not contradicting the concept of Islamic economics, calculation of models with zakah-rate is simpler than models with interest rates.</p>

scholarly journals Asset Pricing Model (CAPM) in Emerging Markets: Evidence in BRICS nations and comparisons with other G20

2019 ◽  
Vol 11 (2) ◽  
pp. 162-175
Author(s):  
Cláudio Francisco Rezende ◽  
Vinícius Silva Pereira ◽  
Antonio Sergio Torres Penedo
Keyword(s):  
Asset Pricing ◽  
Interest Rate ◽  
Risk Premium ◽  
Fixed Effects ◽  
Interest Rate Risk ◽  
Pricing Model ◽  
Risk Premiums ◽  
Asset Pricing Model ◽  
Rate Risk ◽  
The Interest Rate

The objective of this paper is to empirically investigate the applicability of the asset pricing model in a portfolio made up of groups of countries, the G20 for this case. In the meantime, it was intended to compare a complete sample of 14 constituent countries of the group, a subsample of four countries belonging to the BRICS and another of the countries that do not belong. The survey sample consisted of long-term interest rate data from these countries collected in the OECD database and also from the Central Bank of Brazil (Bacen). Based on the results of the regression of Panel data on fixed effects, we found evidence that there is a statistically positive relationship between the market risk premium and the interest rate risk premiums. The regression betas showed that the interest rate risk premium is not sensitive when considering the full sample of the G20 countries but is sensitive in the BRICS sample.

scholarly journals Perspektif Asset Pricing Model dan Pengembangannya Pada Pasar Modal Indonesia

2020 ◽  
Vol 11 (1) ◽  
pp. 25
Author(s):  
Yunan Surono ◽  
Akhmad Irwansyah Siregar ◽  
R Adisetiawan
Keyword(s):  
Asset Pricing ◽  
Interest Rates ◽  
Stock Prices ◽  
Trading Volume ◽  
Arbitrage Pricing Theory ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Holding Period ◽  
Activity Factor ◽  
Stock Indexes

Every investor will pay attention to return and risk in investing in portfolios. In portfolio investment, this is known as the principle of high return high risk. To see this return and risk, 4 (four) models are known, namely 1) Capital Asset Pricing Model (CAPM) with beta factors (market risk), 2) French Fama models with beta, size and value factors, 3) Carhart model with factors beta, size, value and momentum, 4) the Arbitrage Pricing Theory (APT) model in this study, in addition to factors such as the model above, macro economic factors include economic growth, inflation, interest rates, the rupiah exchange rate against US dollars and the money supply. Models 1, 2 and 3 analyze from the fundamental side of the company while models 4 analyze from the macroeconomic side. Based on the theory of Ying (1966), Tauchen & Pitts (1983), Blume (1994), Lee & Swaminathan (2000), Gervais (2001) and Kaniel (2003) that the total trading volume affects the movement of stock indexes, stock prices and affects the magnitude of the level return and investment risk, then in this study the researchers added the total volume of activity factor as an effort to overcome the weaknesses found in the Carhart model where in calculations using the three sequential sort method, this model has not been able to record a holding period (the length of shares in the hands of investors) which in this study. The model with the addition of the total volume activity variable as a five factor pricing model is a model of the researcher's development. From the test results it can be concluded that the development model turned out to be better precision in estimating return and risk and its accuracy is more accurate than existing models.

scholarly journals BIAYA MODAL DAN BIAYA HUTANG DALAM KEUANGAN ISLAM

2019 ◽  
Vol 1 (2) ◽  
pp. 29-50
Author(s):  
Ali Muhayatsyah
Keyword(s):  
Asset Pricing ◽  
Capital Structure ◽  
Islamic Finance ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Price Theory ◽  
Capital Asset ◽  
Asset Pricing Model ◽  
Debt Capital ◽  
The Cost

This study discusses financial policies related to costs of capital and costs of debt (capital structure) in the concept of Islamic finance. For a long time capital structure theory has evolved and is used as a reference for evaluating investment decisions for investors and companies that provide a role for managers in making decisions related to the use of company capital so as to improve company performance and value. The current understanding of the cost of equity only refers to the rate of return that is the investor's right to invest in the company. While the cost of debt is understood as the part that must be received from an investment so that the minimum level of return of creditors is met. The underlying theory is, such as the Leverage model; Miller-Modigliani (MM) model; Capital Asset Pricing Model (CAPM); Arbitrage Price Theory (APT); and Gordon's model which has so far been used in financial theories relating to capital structure problems. The concept of capital structure in Islamic finance gives specific emphasis on the use of capital. The concept of self-regulated capital must be in accordance with Islamic law. This means that any use of capital or debt must have a clear purpose in accordance with Islamic principles with the aim of maximizing the problem so that the creation of falah. In the concept of Islamic capital, it is permissible to take a share of profits on capital, but the amount cannot be determined based on a percentage of capital. The profit is an incentive for capital used in business projects, the calculation of which is done after the business process is completed and other obligations have been fulfilled. Keywords: Costs of Capital, Costs of Debt, Capital Structure, Islamic Finance   Abstrak Penelitian ini membahas tentang kebijakan keuangan yang berkaitan dengan biaya modal dan biaya hutang (struktur modal) dalam konsep keuangan Islam. Sejak lama teori struktur modal telah berkembang dan dijadikan sebagai rujukan penilaian keputusan investasi bagi investor maupun perusahaan yang memberikan peran kepada manajer dalam mengambil keputusan terkait penggunaan modal perusahaan sehingga dapat meningkatkan kinerja dan nilai perusahaan. Pemahaman selama ini mengenai biaya ekuitas hanya mengacu pada tingkat pengembalian yang merupakan hak investor atas investasinya di perusahaan. Sedangkan biaya hutang dipahami sebagai bagian yang harus diterima dari suatu investasi agar tingkat hasil minimum para kreditor terpenuhi. Teori yang melandasi tersebut seperti, model Leverage; model Miller-Modigliani (MM); Capital Asset Pricing Model (CAPM); Arbitrage Price Theory (APT); dan model Gordon yang selama ini digunakan pada teori-teori keuangan yang berkaitan dengan masalah struktur modal. Konsep struktur modal dalam keuangan Islam memberikan penekanan secara spesifik dalam penggunaan modal.Konsep modal sendiri diatur harus sesuai dengan hukum Islam. Artinya setiap penggunaan modal atau hutang harus memiliki tujuan yang jelas sesuai dengan prinsip syariah dengan tujuan untuk memaksimumkan maslahah sehingga terciptanya falah. Dalam konsep modal Islam memperbolehkan pengambilan bagian keuntungan atas modal namun besarannya tidak boleh ditetapkan berdasarkan persentase dari modal. Laba tersebut merupakan insentif atas modal yang digunakan dalam proyek bisnis yang perhitungannya dilakukan sesudah proses bisnis selesai dan kewajiban-kewajiban lain telah terpenuhi. Kata kunci: Biaya Modal, Biaya Hutang, Struktur Modal, Keuangan Islam

Mathematical modelling of a shariah-compliant capital asset pricing model

2020 ◽  
Vol 11 (1) ◽  
pp. 90-109 ◽  
Author(s):  
Mohamad Hafiz Hazny ◽  
Haslifah Mohamad Hasim ◽  
Aida Yuzy Yusof
Keyword(s):  
Asset Pricing ◽  
Variance Analysis ◽  
Islamic Finance ◽  
Capital Asset Pricing ◽  
Financial Assets ◽  
Pricing Model ◽  
Capital Asset ◽  
Content Type ◽  
Asset Pricing Model ◽  
Mean Variance

Purpose The capital asset pricing model (CAPM) is the most widely used asset pricing model that measures risk–return relationship. The CAPM is based on Markowitz’s mean variance analysis. The advancement of Islamic finance leads to the question whether or not the practice of modern investment theories and analyses such as the Markowitz’s mean variance analysis and CAPM are in accordance to shariah and could be used in pricing Islamic financial assets. Therefore, this paper aims to present a review of the CAPM and to discourse the set of assumptions underlying the model in terms of shariah compliance. Design/methodology/approach Although most of the assumptions are not contradictory to shariah principles, there are Islamic variables such as prohibition of short selling, purification and zakat that should be taken into consideration when pricing Islamic financial assets. We then develop a mathematical model which is a modification of the traditional CAPM that incorporates principles of Islamic finance and integrating zakat, purification of return and exclusion of short sales. Findings As a proof-of-concept, this paper presents the results of an empirical study on the proposed shariah-compliant CAPM in comparison to the traditional CAPM. The results show that the proposed Islamic CAPM is appropriate and applicable in examining the relationship between risk and return in the Islamic stock market. Originality/value This study contributes to existing body of knowledge by presenting an algorithm and mathematical derivation of the shariah-compliant CAPM which has been lacking in the literature of Islamic finance. The paper offers a novel approach in pricing Islamic financial assets in accordance to shariah, advocated by modern investment theories of Markowitz’s mean variance analysis and CAPM.

scholarly journals International Real Estate Review

2018 ◽  
Vol 21 (1) ◽  
pp. 41-70
Author(s):  
Wong Weng Wong ◽  
◽  
Wejendra Reddy ◽  
Keyword(s):  
Asset Pricing ◽  
Real Estate ◽  
Interest Rates ◽  
Market Risk ◽  
Interest Rate Risk ◽  
Medium Size ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Short And Long Term

This study explores the sensitivity of the performance of Australian real estate investment trusts (A-REITs) to changes in short and long term interest rates. Based on the intertemporal capital asset pricing model in Merton (1973), we propose an asset pricing model that consists of market returns, macroeconomic indicators, and short and long term interest rates. The effect of market capitalisation is also explored. High debt funds show greater sensitivity to adverse movements in long term interest rates compared to low debt funds. This suggests that gearing levels play a significant role in the returns generating process. All size based portfolios exhibit strong exposure to market risk with medium size A-REITs displaying greater sensitivity to movements in both short and long term interest rates. Although market risk became a stronger driver of returns during the Global Financial Crisis (GFC), the impact was less prominent post-GFC possibly due to already low levels of interest which created an environment of cheap credit. The implications for asset allocation strategies are that portfolio managers and other investors can reduce exposure to interest rate risk by selecting funds with less leverage and are large in size. High debt funds benefit more during periods of low interest but this may be offset when there is a corresponding increase in long term interest rates.

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