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Performance of Syariah and Composite Indices: Evidence from Bursa Malaysia

Listed author(s):
  • Mohamed Albaity


    (Department of Banking and Finance, Faculty of Business and Accountancy, University of Malaya, 50603 Kuala Lumpur, Malaysia)

  • Rubi Ahmad

    (Department of Banking and Finance, Faculty of Business and Accountancy, University of Malaya, 50603 Kuala Lumpur, Malaysia)

This study provides new evidence on the risk and return performance of the Kuala Lumpur Syariah Index (KLSI) and the Kuala Lumpur Composite Index (KLCI). An Islamic stock market index such as KLSI selects stocks according to Islamic laws, and thus has a more stringent screening process than its conventional counterpart, KLCI. Our results, however, provide no evidence of significant statistical differences in risk-adjusted returns between Islamic and conventional stock market indices during 1999–2005. We also employ the causality and Johansen cointegration tests to examine their short- and long-run relationships. Besides a significant short-run presence of bidirectional causality, the long-term equilibrium indicates that both indices move in tandem. This suggests that the movement in KLCI gives a good indication as to where KLSI will move in the short-run and long-run. Therefore, prediction of one based on the other is constructive.

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Article provided by Penerbit Universiti Sains Malaysia in its journal Asian Academy of Management Journal of Accounting and Finance.

Volume (Year): 4 (2008)
Issue (Month): 1 ()
Pages: 23-43

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Handle: RePEc:usm:journl:aamjaf00401_23-43
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