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Title
Effect of shariah compliance on stock performance at the Nairobi securities exchange |
Full text
http://erepository.uonbi.ac.ke/11295/98736 |
Date
2016 |
Author(s)
Kamau, Karanja K |
Abstract
The study set out to establish the effect of Shari'ah compliance on stock returns in the NSE.
The objective was achieved through comparison of the risk adjusted and excess returns
(Jensen's alpha), returns per unit of volatility (Sharpe & Treynor ratios) between the NSE 20
index and a constructed Shari'ah index based on the Morgan Stanley Capital International
(MSCI) global Shari'ah screening criterion. The Shari'ah index generated higher and
statistically significant excess returns and mean risk adjusted returns. The index also recorded
superior Sharpe and Treynor ratios. The Sharpe ratio difference was statistically significant
while the Treynor ratio difference was insignificant. The volatility as measured by beta was
of statistical irrelevance though both indices underperformed the market. The study found the
Shari'ah index to outperform the conventional counterpart as far as generation of excess
returns and mean risk adjusted return and returns per unit of total volatility (Sharpe ratio).
The study recommends formation of a Shari'ah board, construction of a Shari'ah index,
creation of an Islamic capital market, Public sensitization, education and timely
dissemination of Shari'ah related information to investors. The recommendations were aimed
at faster growth and regulation of the nascent industry. Further studies should be done using
other Shari'ah screening methods in the greater East Africa region and the results compared
with those of this study. It would be worthwhile to do another study contrasting a Shari'ah
index with that of FTSE NSE 15 and FTSE NSE 25 with an objective of ascertaining whether
the same conclusions would be drawn. In order to draw more robust and representative
conclusions the study proposes a further study on the same subject but covering a longer
period since the inception of the NSE 20 index. |
Language
en |
Publisher
University of Nairobi |
Type of publication
Thesis |
Format
application/pdf |
Rights
Attribution-NonCommercial-NoDerivs 3.0 United States; http://creativecommons.org/licenses/by-nc-nd/3.0/us/ |
Repository
Nairobi - University of Nairobi
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Added to C-A: 2022-10-19;10:22:58 |
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