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- Title
Downside Risk Measures Incorporated in Islamic Capital Asset Pricing Model.
- Authors
Ayub, Usman; Raza, Naveed; Mujtaba, Ghulam; Masih, Mansur; saleem, Usama; Shafique, Attayah
- Abstract
This study attempts to examine different risk measures and their combinations as the part of a suitable asset pricing model for Islamic stocks. We choose beta, coskewness, downside beta, and downside coskewness and their combinations in single- and two-factor asset pricing model settings. We selected 91 companies from PSX using monthly returns from 2000-2018. The double sorting procedure is adopted for robustness, and collinearity between beta/downside beta and its respective higher moments is addressed by orthogonalizing each variable with its counterpart. Results tend to indicate that the two-factor model comprising downside beta and downside coskewness-based model is the most suitable asset pricing model for Islamic stocks. The use of two risk measures in the Islamic asset pricing framework yields a better understanding of stock prices which can help assess the risk of Islamic stocks for an investment decision.
- Publication
COMSATS Journal of Islamic Finance (CJIF), 2022, Vol 7, Issue 2, p21
- ISSN
2519-707X
- Publication type
Academic Journal
- DOI
10.26652/cjif.7202222