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The Conditional Capm And Cross-Sectional Evidence Of Return And Beta For Islamic Unit Trusts In Malaysia

Listed author(s):
  • Abd. Ghafar Ismail and Mohd. Saharudin Shakrani


The aim of this paper is to investigate the relationship between return and beta for Islamic unit trusts using the cross-sectional regression analysis. The estimation of return and beta without differentiating between positive and negative excess market returns produces a flat unconditional relationship between return and beta. Using the conditional CAPM and cross-sectional regression analysis, the evidence in this paper tends to support a significant positive relationship in an up-market and a significant negative relationship in a down-market. This paper suggests that beta could be used as a tool in explaining cross-sectional differences in Islamic unit trusts’ returns and as a measure of market risk. Based on the adjusted-R2 and standard error of the conditional relationship between returns we find that beta is higher in a down-market than in an up-market. Therefore, both statistics are appropriate measurements of conditional relationships.

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Article provided by IIUM Journal of Economis and Management in its journal IIUM Journal of Economics and Management.

Volume (Year): 11 (2003)
Issue (Month): 1 (June)
Pages: 1-20

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Handle: RePEc:ije:journl:v:1:y:2003:i:2:p:1-20
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