6th International Islamic Finance Conference 2008 Peer Reviewed Paper
Comparing the Performance of Islamic Stocks in Indonesia and Malaysia
Miranti Kartika Dewi
Centre for Islamic Economics and Business
Department of Accounting
Faculty of Economics
University of Indonesia
Email: [email protected]
Ilham Reza Ferdian
Department of Management
Faculty of Economics
University of Indonesia
Abstract
This study measures the performance of Islamic stocks in Indonesia and Malaysia, two
countries which have growing Islamic Capital Markets. By using the tools of Sharpe, Treynor
and Jensen Index, the study finds that Malaysian Islamic stocks seem to be outperformed the
Indonesian Islamic stocks. One of the reasons that may explain the result is the fact that the
Malaysian Islamic Capital Market is relatively more established than the Indonesian one.
Keywords: Islamic Stocks, Performance, Sharpe, Treynor, Jensen.
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
1.0 Introduction
The most prominent feature that can distinguish Islamic capital market from its conventional
counterpart is that the former’s activities are carried out in ways which does not conflict with
the principles of Islam (Shari’ah). It represents an assertion of religious law in capital market
transactions where the market is free from prohibited activities and elements such as riba
(usury), maisir (gambling), gharar (ambiguity), risywah (bribery), and zulm (exploitation).
Islamic capital markets are now gaining the momentum to grow into a vibrant marketplace,
especially for emerging market borrowers in the regions of the Middle-East, South-East Asia,
South Asia and North Africa. Beside the over-liquidity of Middle Eastern investors from
increase in oil price, factors such as growing awareness of and demand for investing in
accordance to Islamic principles on a global scale has created a flourishing Islamic capital
market. Another factor which contributes to its development is availability of numbers of
Islamic capital market instruments, such as Islamic stock, sukuk, Islamic mutual funds, etc.
Specifically say on Islamic stock, investors can monitor its performance fluctuations by
means of Islamic index. In Malaysia, Kuala Lumpur Shari’ah Index (KLSI) was launched on
17 April 1999 in order to satisfy the demands of local and foreign investors who seek to
invest in stocks that are compliant with the Islamic laws. While in Indonesia, Indonesia
Islamic Index (III, previously known as Jakarta Islamic Index or JII) was launched in 2000.
Today, approximately 70% of 1,025 listed stocks on Bursa Malaysia Bhd have been
considered as Shari’ah compliant stocks. Moreover, the Indonesia Stock Exchange (IDX),
there are only 30 out of 380 stocks pass the Shari’ah compliance criteria. This fact supports
the reality that the market capitalization of IDX is only approximately US$81 billion, much
lower if compared with Bursa Malaysia which has market capitalization of US$181 billion.
To fasten the development of its Islamic capital market, Indonesia has also recently revamped
its regulatory framework through its capital market supervisory body (Bapepam) as it pertains
to these financial products and services. Besides that, the authorization of two important
regulations in 2008 by the Indonesian People Parliamentary on Islamic bank and Indonesian
Government Sovereign Sukuk is believed can support the growth of this sector.
2.0 Islamic Stock Screening
For a stock to become Islamic stock, it must pass some qualitative and quantitative criteria
which will ensure its compliance with the Islamic principles. The qualitative screens to be
applied relate to the main activity of the company and to the way in which the company is
financed or invests its liquid assets. This criterion gives implication that all main activities of
the issuing company must be halal (permitted by Islamic principles). This means all banks
and insurance companies whose activity is interest-based are to be screened out, as well as all
companies involved in alcohol, tobacco and armaments manufacturing and trading, or
involved in entertainment businesses. Moreover, if the business is halal but the company
borrows money on interest, or deposits its surpluses into interest-bearing accounts, the
shareholders have the moral duty to file resolutions in the general assembly to publicly
condemn this behavior (Usmani, 2002).
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
Shall the stocks pass those above qualitative criteria, they are to be analyzed on the basis of
quantitative screens related to debt, interest-bearing securities and receivables and cash.
According to Elgari (2002), the total outstanding debt must not exceed one-third of the
capital. The same rule applies to cash and interest-bearing securities of the assets. The
threshold of 33% derives directly from the words of the Prophet, who states that “judgment is
based on majority, not on minority”, and “the dividing line between a majority and minority
is one third, and the third as a portion is considered to be much”. So, from the interpretation
of these two maxims, the scholars derive that income from non-permissible sources should
account for less than 33%. If the company's business is legitimate, and its conduct is in
compliance with the rules of Shari’ah, Muslims are allowed to own its common stocks.
Common stocks were approved as an instrument for investment by the Council of the Islamic
Fiqh Academy in 1993. Moreover, is this permission also happens with preferred stocks?
Islamic legal point of view tells that investment in preferred stocks is prohibited since it
guarantees the amount of the dividend. Additionally, any predetermined and guaranteed rate
of return is classified as riba. Therefore, Muslim investors may only invest in the common
stocks.
Though common stocks are a legitimate form of investment in Islam, many of the practices
associated with stock trading are not halal. Short selling and margin trading, for instance, are
severely restricted. The prohibition of borrowing to invest (margin trading) is based on the
prohibition of riba, whilst short selling involves huge risk with almost no upper limit.
Moreover, Islamic principles tell that Muslim cannot sell anything that not belongs to them.
3.0 Literature Review
Majority of the previous studies analyze the performance of socially responsible stock index,
which is considered to have many similar criteria with Islamic stock index, in United States.
Statman (2000) analyzed the performance of Domini Social Index (DSI), an index of socially
responsible companies, and the performance of socially responsible stocks against the
performance of S&P500 companies in US from1990:5 to 1998:9. This study used statistical
and mathematical techniques such as annualized mean return, standard deviation, Jensen
alpha, excess standard deviation adjusted returns, and simple t-test for comparing means. The
result showed that raw returns and risk for DSI was higher than S&P500. However, in term of
returns adjusted to risk DSI was lower than S&P500 but not statically significant. On the
other hand, DSI were less risky and have lower returns as compared with S&P500.
Another study was done by Kreander, Gray, Power, and Sinclair (2000). They analyze 40 SRI
funds from seven countries using a matching approach. The countries included are Belgium
(1), Germany (4), the Netherlands (2), Norway (2), Sweden (11), Switzerland (2) and the UK
(18).9 The authors apply four criteria for the matching procedure: age, size, country and
investment universe of the fund. Like most of the earlier studies, they use Jensen’s alpha,
Sharpe ratio, and Treynor ratio as performance measures. In the regression equation for
Jensen’s alpha a measure for market timing is included. This is an important improvement
compared to earlier studies since market timing of the fund management can significantly
bias the estimation of Jensen’s alpha. The statistical tests concerning the differences in the
performance measures show that the Sharpe and Treynor ratios of the conventional funds are
slightly higher but not significant whereas the Jensen’s alpha of the SRI funds is higher but
only at the 10% significance level.
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
The authors conclude that SRI and conventional funds exhibit a very similar performance. In
addition, Hakim and Rashidian (2002) examined the risk and return of Islamic stock market
index in US. Their results showed that the Islamic index was influenced by factor
independent from the broad market or interest rate.
This finding provided a different perspective to claim by Dow Jones Inc. that the index
exhibits significant high correlation in the broad market. Therefore, the evidence suggested
that such correlation was merely temporary and spurious. However, their findings suggested
that the Islamic index presents unique risk-return characteristics, which known as company or
unsystematic risk and return, an observation reflected in a risk profile significantly different
from the Wilshire 5000. This result is even more important given the fact that the Wilshire
5000 index is considerably more diversified than Islamic index.
One of the studies on Islamic stock market in Asia was done by Ahmed and Ibrahim (2002).
They compared the performance of Kuala Lumpur Sharia Index (KLSI) with Kuala Lumpur
Composite Index (KLCI) from the period of 1999 to 2002. They used various methodologies
to investigate the performance measured by risk and return of both indices. Techniques used
are adjusted Sharpe ratio, Treynor Index, adjusted Jensen Alpha, and t-test for comparing
means. They divided the sample into three periods overall, growing form1999:4 to 2000:2
and decline form 2000:3 to 2002:1. This study results that for the overall and declining
periods the return was low for KLSI while for the growing period KLSI has slightly
outperformed the market. For risk, KLCI is riskier for all the periods. When comparing the
means the results were statistically insignificant for all the periods.
In addition, using different measures of risk adjusted return only in the growing periods;
KLSI appeared to be higher than KLCI. They argued that the underperformance of the KLSI
might be because the market is dominated by non-Muslims investors and less existence of
Muslim investment in securities which are comply with Islamic principles. Hussein and
Omran (2005) studied the performance Islamic index in Dow Jones against the Dow Jones
index in three periods, namely, the entire period, bull period and the bear period. They
performed few analytical and statistical techniques to calculate the risk adjusted return for
monthly date from 1995:12 to 2003:6. They used raw return, Sharpe ratio, Jensen Alpha, and
Treynor risk adjusted formulas, while they used parametric t-statistics and non-parametric
Wilcoxson signed rank test to test whether the Islamic index has abnormal return. Moreover,
they apply cumulative abnormal return and buy-and-hold abnormal returns to investigate the
long run performance of the indices as well as the wealth relative as a performance measure.
The results suggested that the Islamic index outperformed the non-Islamic index both in the
entire and bull periods while the opposite is true for the bear period although it was not
statistically significant in the bear period. In addition the wealth relative indicate that $1
invested in both the whole and bull periods will yield $1.16 and $1.27 respectively while it
will yield $0.9 in the bear period. The main reasons pointed out for the outperforming and
underperforming is of two folds. First, this most profitable firm borrow the least, this is true
since it is one of the screening method of DJIMI is to exclude companies with more than 33%
of debt. Second, the events of September 11 might cause Islamic investment to be less
popular and the exclusion of alcoholic firms from the Islamic index, where they are one of
the best performers during the bear market period.
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
4.0 Data and Methodology
4.1 Data Sources
Data used in this study were obtained from Bloomberg Database. The filter used in the stocks
selection is based on the top thirty stocks from January 1, 2006 to October 31, 2007. The
starting date is chosen because more stocks were available to be traded at that time. With the
selection process, 15 Indonesian Islamic stocks and 24 Malaysian Islamic stocks are
collected.
4.2 Methodology
Treynor (1965), Sharpe (1966), and Jensen measure (1968) are used in evaluating the
performance of each stock that furthermore will be compared to the benchmark indices.
Treynor ratio is also known as the Return to Volatility Ratio. This ratio measures a stock's
average excess return to the stock's beta, so that the risk measured on this ratio is only the
systematic risk. The result generated from the Treynor formula, as shown below, is simply
the slope of the line between the risk free rate (RFR) and the risk-return plot for the stock.
T=
Ri − RFR
βi
The greater slope indicates a better risk-return tradeoff. Thus, higher T generally indicates
better performance as illustrated on the Figure 1 below.
Figure 1: Plot of Performance on SML (T-Measure)
Source: Reilly/Brown. Investment Analysis and Portfolio Management. 2006
Sharpe ratio is similar to the above except it uses beta instead of standard deviation. This
ratio measures the return earned in excess of the risk free rate on a portfolio to the portfolio's
total risk as measured by the standard deviation in its returns over the measurement period.
S=
Ri − RFR
σi
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
The Sharpe ratio is an appropriate measure of performance for an overall portfolio
particularly when it is compared to another portfolio, or another index such as the S&P 500,
KLSI, III, etc. Compared to Treynor ratio which is appropriate to be used in measuring the
individual assets, Sharpe ratio is more appropriate to be used in evaluating the well
diversified portfolios since the later ratio uses total risk as one component of its calculation.
Figure 2: Plot of Performance on CML (S Measure)
Source: Reilly/Brown. Investment Analysis and Portfolio Management. 2006
Jensen's Ratios, however, is a portfolio performance measure based upon the Capital Asset
Pricing Model (CAPM) which calculate the excess return on a portfolio over time. The
breakdown of the formula can be seen as follow.
R jt − RFR jt = α j + β j (RM − RFR ) + e jt
R jt = α j + RFR jt + β j (RM − RFR ) + e jt
α j = R jt − [ RFR jt + β j (RM − RFR ) + e jt ]
This ratio also measures the ability of active management to increase returns above those that
are purely a reward for bearing market risk. Therefore, it also can be interpreted as a measure
of how much the portfolio “beat the market”. A portfolio with a consistently positive excess
return (adjusted for risk) will have a positive alpha, vice versa.
Figure 3: Plot of Performance on CML (S Measure)
Source: Corrado, C.J. Fundamental of Investment. 2002
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
5.0 Empirical Results
The Treynor ratio is calculated for each unit trust using the mean return, the beta of the unit
trust and the mean return of the RFR asset corresponds to the same period. The rule of thumb
is that the higher the ratio, the better is the stocks performance. On table 1, it can be observed
that by using the Treynor ratio, all of the Islamic stocks have positive ratios, where BUMI
with Treynor ratio of 1.6181 holds the first position compared to other stocks, followed by
INCO 1.4558 and PTBA 0.9914 in the next positions. However, in table 2, DIGI holds the
first position with the ratio of 1.3025, followed by UMWH 0.8101 and ASP 0.8017.
Table 1: Performance of Indonesian Islamic Stocks Sort by using Treynor Ratio
No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Islamic Stocks
BUMI
INCO
PTBA
ANTM
UNTR
SMCB
CTRA
INTP
INDF
BLTA
TLKM
UNVR
ISAT
KLBF
MEDC
Ri
145.56%
166.36%
138.82%
131.54%
88.25%
81.08%
94.54%
69.38%
68.93%
60.84%
49.37%
35.02%
33.37%
24.81%
26.33%
Rm
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
Rf
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
σ
51.82%
60.75%
60.76%
65.30%
47.38%
55.97%
71.83%
45.90%
48.87%
50.34%
38.85%
39.78%
44.37%
38.22%
50.46%
Sharpe Treynor Jensen
β
0.8352 2.6082 1.6181 0.8647
1.0712 2.5671 1.4558 0.9351
1.2952 2.1133 0.9914 0.5292
1.4763 1.8551 0.8205 0.3509
0.9614 1.6430 0.8096 0.2180
0.9506 1.2625 0.7434 0.1526
1.1872 1.1712 0.7087 0.1494
0.8588 1.2847 0.6866 0.0891
1.0201 1.1974 0.5737 -0.0093
0.8855 1.0018 0.5695 -0.0118
1.0504 1.0029 0.3710 -0.2225
0.7618 0.6186 0.3230 -0.1979
0.9272 0.5174 0.2476 -0.3108
0.7135 0.3769 0.2019 -0.2718
1.0371 0.3155 0.1535 -0.4453
Table 2: Performance of Malaysian Islamic Stocks Sort by using Treynor Ratio
No
1
2
3
4
5
6
7
8
9
10
11
Islamic
Stocks
DIGI
UMWH
ASP
MMC
MBC
IOI
PETD
UEM
KLK
PEP
GAM
Ri
101.66%
71.44%
93.20%
116.60%
91.27%
86.43%
65.32%
198.10%
80.43%
67.29%
84.05%
Rm
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
Rf
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
σ
36.59%
29.58%
36.13%
43.97%
38.47%
39.11%
29.25%
87.87%
36.75%
32.94%
45.20%
β
0.755
0.8408
1.1211
1.4169
1.1184
1.1283
0.8716
2.9616
1.3026
1.2305
1.5894
Sharpe Treynor
2.6874
1.3025
2.3029
0.8101
2.4878
0.8017
2.5762
0.7995
2.2863
0.7863
2.125
0.7365
2.1193
0.7113
2.2166
0.6577
2.0981
0.5919
1.9421
0.5198
1.7859
0.5079
Jensen
0.6966
0.3618
0.473
0.5947
0.4547
0.4025
0.289
0.823
0.2764
0.1723
0.2037
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
12
13
14
15
16
17
18
19
20
21
22
23
24
SPSB
BAK
LMC
IJM
PTG
YTL
YTLP
AIRA
TNB
PLUS
T
MISC
NESZ
64.43%
54.05%
84.97%
52.10%
15.15%
25.67%
11.58%
15.74%
11.06%
6.41%
4.85%
0.81%
-1.92%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
41.30%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
3.32%
39.88%
29.03%
53.63%
36.81%
25.03%
34.02%
22.14%
36.72%
25.65%
22.75%
24.19%
22.08%
15.72%
1.2101
1.114
1.8097
1.2977
0.5037
1.2003
0.5809
1.0255
0.8087
0.6796
0.6565
0.4666
0.2678
1.5324
1.7472
1.5223
1.325
0.4727
0.6568
0.3729
0.3382
0.3015
0.1358
0.063
-0.1139
-0.3337
0.505
0.4553
0.4511
0.3759
0.2349
0.1861
0.1422
0.1211
0.0957
0.0455
0.0232
-0.0539
-0.1959
0.1515
0.0842
0.1292
-0.0051
-0.073
-0.2324
-0.138
-0.2653
-0.2298
-0.2272
-0.2341
-0.2024
-0.1541
The Sharpe measure, as already mentioned above, has almost the same formula with the
Treynor measure, but using standard deviation instead of beta as the denominator. This ratio
measures the excess return per stock of total risk. The higher the ratio, the better is the
Islamic stock performance. Table 3 and 4 shows the result of the Sharpe ratios of Indonesian
and Malaysian Islamic stocks that implied the excess return per share of total risk of an
Islamic stock. By using this ratio, all the stocks have positive ratios – except MISC and
NESZ that have the negative ratios – which reflect that the stocks performances are
outperformed the market. However, the results are slightly different compared to when using
Treynor ratio. The Indonesian Islamic stocks like BUMI, INCO, and PTBO still held the
three highest positions. On the other hand, UNVR, ISAT, MEDC and KLBF held the same
chronological positions as when calculated using Treynor ratio. The Malaysian Islamic stocks
first and third performer analyzed by using Sharpe ratio are DIGI and ASP, the same resulted
by Treynor ratio, while the next positions are relatively different, which is MMC which was
in the fourth rank in the Treynor shorting. In over all, Sharpe measures results show stronger
Islamic stocks performance compared to Treynor results.
Table 3: Performance of Indonesian Islamic Stocks Sort by using Sharpe Ratio
No Islamic Stocks
Ri
Rm
Rf
σ
β
1
2
3
BUMI
INCO
PTBA
145.56% 68.69% 10.41% 51.82% 0.8352
166.36% 68.69% 10.41% 60.75% 1.0712
138.82% 68.69% 10.41% 60.76% 1.2952
4
ANTM
131.54% 68.69% 10.41% 65.30% 1.4763
5
6
7
8
9
UNTR
INTP
SMCB
INDF
CTRA
88.25%
69.38%
81.08%
68.93%
94.54%
10
TLKM
49.37% 68.69% 10.41% 38.85% 1.0504
68.69%
68.69%
68.69%
68.69%
68.69%
10.41%
10.41%
10.41%
10.41%
10.41%
47.38%
45.90%
55.97%
48.87%
71.83%
0.9614
0.8588
0.9506
1.0201
1.1872
Sharpe Treynor Jensen
2.6082
1.6181 0.2225
2.5671
1.4558 0.9351
2.1133
0.9914 0.8647
1.8551
0.8205 0.1979
1.6430
0.8096 0.3108
1.2847
0.6866 0.3509
1.2625
0.7434 0.2180
1.1974
0.5737 0.0891
1.1712
0.7087 0.5292
1.0029
0.3710 0.0093
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
11
BLTA
60.84% 68.69% 10.41% 50.34% 0.8855
1.0018
0.5695
12
13
UNVR
ISAT
35.02% 68.69% 10.41% 39.78% 0.7618
33.37% 68.69% 10.41% 44.37% 0.9272
0.6186
0.5174
0.3230
0.2476
14
15
KLBF
MEDC
24.81% 68.69% 10.41% 38.22% 0.7135
26.33% 68.69% 10.41% 50.46% 1.0371
0.3769
0.3155
0.2019
0.1535
Table 4: Performance of Malaysian Islamic Stocks Sort by using Sharpe Ratio
No
1
Islamic Stocks
DIGI
Ri
101.66%
Rm
41.30%
Rf
3.32%
σ
36.59%
β
0.7550
Sharpe
2.6874
Treynor
1.3025
Jensen
0.6966
2
MMC
116.60%
41.30%
3.32%
43.97%
1.4169
2.5762
0.7995
0.5947
3
ASP
93.20%
41.30%
3.32%
36.13%
1.1211
2.4878
0.8017
0.4730
4
UMWH
71.44%
41.30%
3.32%
29.58%
0.8408
2.3029
0.8101
0.3618
5
MBC
91.27%
41.30%
3.32%
38.47%
1.1184
2.2863
0.7863
0.4547
6
UEM
198.10%
41.30%
3.32%
87.87%
2.9616
2.2166
0.6577
0.8230
7
IOI
86.43%
41.30%
3.32%
39.11%
1.1283
2.1250
0.7365
0.4025
8
PETD
65.32%
41.30%
3.32%
29.25%
0.8716
2.1193
0.7113
0.2890
9
KLK
80.43%
41.30%
3.32%
36.75%
1.3026
2.0981
0.5919
0.2764
10
PEP
67.29%
41.30%
3.32%
32.94%
1.2305
1.9421
0.5198
0.1723
11
GAM
84.05%
41.30%
3.32%
45.20%
1.5894
1.7859
0.5079
0.2037
12
BAK
54.05%
41.30%
3.32%
29.03%
1.1140
1.7472
0.4553
0.0842
13
SPSB
64.43%
41.30%
3.32%
39.88%
1.2101
1.5324
0.5050
0.1515
14
LMC
84.97%
41.30%
3.32%
53.63%
1.8097
1.5223
0.4511
0.1292
15
IJM
52.10%
41.30%
3.32%
36.81%
1.2977
1.3250
0.3759
-0.0051
16
YTL
25.67%
41.30%
3.32%
34.02%
1.2003
0.6568
0.1861
-0.2324
17
PTG
15.15%
41.30%
3.32%
25.03%
0.5037
0.4727
0.2349
-0.0730
18
YTLP
11.58%
41.30%
3.32%
22.14%
0.5809
0.3729
0.1422
-0.1380
19
AIRA
15.74%
41.30%
3.32%
36.72%
1.0255
0.3382
0.1211
-0.2653
20
TNB
11.06%
41.30%
3.32%
25.65%
0.8087
0.3015
0.0957
-0.2298
21
PLUS
6.41%
41.30%
3.32%
22.75%
0.6796
0.1358
0.0455
-0.2272
22
T
4.85%
41.30%
3.32%
24.19%
0.6565
0.0630
0.0232
-0.2341
23
MISC
0.81%
41.30%
3.32%
22.08%
0.4666
-0.1139
-0.0539
-0.2024
24
NESZ
-1.92%
41.30%
3.32%
15.72%
0.2678
-0.3337
-0.1959
-0.1541
Afterward, when Jensen Alpha are calculated by using the formula stated on the methodology
part above, we get the result, as presented on the Table 5, that eight of fifteen Indonesian
Islamic stocks have positive alpha, which are INCO 0.9351, BUMI 0.8647, PTBA 0.5292,
ANTM 0.3509, UNTR 0.2180, SMCB 0.1526, CTRA 0.1494, and INTP 0.0891. While,
fourteen of twenty four Malaysian Islamic stocks have positive alpha, with the top three
performers are UEM 0.8230, DIGI 0.6966, and MMC 0.5947.
0.4453
0.2718
0.1526
0.0118
0.1494
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
Table 5: Performance of Indonesian Islamic Stocks Sort by using Jensen Alpha
No
1
2
3
4
5
6
7
8
Islamic Stocks
INCO
BUMI
PTBA
ANTM
UNTR
SMCB
CTRA
INTP
Ri
166.36%
145.56%
138.82%
131.54%
88.25%
81.08%
94.54%
69.38%
Rm
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
68.69%
Rf
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
10.41%
Σ
60.75%
51.82%
60.76%
65.30%
47.38%
55.97%
71.83%
45.90%
9
INDF
68.93% 68.69% 10.41% 48.87%
10
BLTA
60.84% 68.69% 10.41% 50.34%
11
UNVR
35.02% 68.69% 10.41% 39.78%
12
TLKM
49.37% 68.69% 10.41% 38.85%
13
KLBF
24.81% 68.69% 10.41% 38.22%
14
ISAT
33.37% 68.69% 10.41% 44.37%
15
MEDC
26.33% 68.69% 10.41% 50.46%
β
Sharpe Treynor Jensen
1.0712 2.5671
1.4558 0.9351
0.8352 2.6082
1.6181 0.8647
1.2952 2.1133
0.9914 0.5292
1.4763 1.8551
0.8205 0.3509
0.9614
1.643
0.8096
0.218
0.9506 1.2625
0.7434 0.1526
1.1872 1.1712
0.7087 0.1494
0.8588 1.2847
0.6866 0.0891
1.0201 1.1974
0.5737 0.0093
0.8855 1.0018
0.5695 0.0118
0.7618 0.6186
0.323 0.1979
1.0504 1.0029
0.371 0.2225
0.7135 0.3769
0.2019 0.2718
0.9272 0.5174
0.2476 0.3108
1.0371 0.3155
0.1535 0.4453
Table 6: Performance of Malaysian Islamic Stocks Sort by using Jensen Alpha
No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Islamic Stocks
Ri
Rm
Rf
σ
β
Sharpe Treynor Jensen
UEM
198.10% 41.30% 3.32% 87.87% 2.9616 2.2166
0.6577 0.8230
DIGI
101.66% 41.30% 3.32% 36.59% 0.7550 2.6874
1.3025 0.6966
MMC
116.60% 41.30% 3.32% 43.97% 1.4169 2.5762
0.7995 0.5947
ASP
93.20% 41.30% 3.32% 36.13% 1.1211 2.4878
0.8017 0.4730
MBC
91.27% 41.30% 3.32% 38.47% 1.1184 2.2863
0.7863 0.4547
IOI
86.43% 41.30% 3.32% 39.11% 1.1283 2.1250
0.7365 0.4025
UMWH
71.44% 41.30% 3.32% 29.58% 0.8408 2.3029
0.8101 0.3618
PETD
65.32% 41.30% 3.32% 29.25% 0.8716 2.1193
0.7113 0.2890
KLK
80.43% 41.30% 3.32% 36.75% 1.3026 2.0981
0.5919 0.2764
GAM
84.05% 41.30% 3.32% 45.20% 1.5894 1.7859
0.5079 0.2037
PEP
67.29% 41.30% 3.32% 32.94% 1.2305 1.9421
0.5198 0.1723
SPSB
64.43% 41.30% 3.32% 39.88% 1.2101 1.5324
0.5050 0.1515
LMC
84.97% 41.30% 3.32% 53.63% 1.8097 1.5223
0.4511 0.1292
BAK
54.05% 41.30% 3.32% 29.03% 1.1140 1.7472
0.4553 0.0842
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
15
IJM
52.10% 41.30% 3.32% 36.81% 1.2977
1.3250
0.3759
16
PTG
15.15% 41.30% 3.32% 25.03% 0.5037
0.4727
0.2349
17
YTLP
11.58% 41.30% 3.32% 22.14% 0.5809
0.1422
18
NESZ
-1.92% 41.30% 3.32% 15.72% 0.2678
-0.1959
19
MISC
0.81% 41.30% 3.32% 22.08% 0.4666
0.3729
0.3337
0.1139
20
PLUS
6.41% 41.30% 3.32% 22.75% 0.6796
0.1358
0.0455
21
TNB
11.06% 41.30% 3.32% 25.65% 0.8087
0.3015
0.0957
22
YTL
25.67% 41.30% 3.32% 34.02% 1.2003
0.6568
0.1861
23
T
4.85% 41.30% 3.32% 24.19% 0.6565
0.0630
0.0232
24
AIRA
15.74% 41.30% 3.32% 36.72% 1.0255
0.3382
0.1211
-0.0539
Conclusion and Recommendation
This study assesses the comparative performance of Indonesian and Malaysian Islamic stocks
over the period of January 2006 to October 2007 by using the daily stocks returns. The results
are relatively consistent across the different used measurement tools, while the slight
differences are somehow happen because of the specific Islamic stocks position compared to
the market which is reflected by beta, the fluctuation of returns which is reflected by standard
deviation, and also the average daily returns of the Islamic stocks themselves.
Between the two countries, the empirical result obtained from the study may come to the
conclusion that Malaysian Islamic stocks seem to be outperformed the Indonesian Islamic
stocks. This phenomenon can be happened due to the fact that the Malaysian Islamic Capital
Market is relatively more established than the Indonesian one. The total amount of stocks,
number of players and the huge demand on the Malaysian Islamic stocks also can be the
strength that causes this better position. On the other hand, Indonesian Islamic Capital Market
is relatively new, and besides that some other factors also trigger the development of this
market, such as the lack understanding of capital market players about Islamic capital market,
the availability of information regarding Islamic capital market, the investors’ interest on the
products of Islamic capital market, the regulation framework, the sharia supervisory on the
related institutions, and also the regulator of the Islamic capital market. Therefore, it is
needed for the Indonesian Government as well as Capital Market Regulator and Players to
support the development of this Islamic Capital Market.
As overall conclusion, since the study found that the Islamic stocks are relatively
outperforming the market; these instruments can be taken to consideration by both
Conventional and Islamic investors as the part of their portfolio selection.
0.0051
0.0730
0.1380
0.1541
0.2024
0.2272
0.2298
0.2324
0.2341
0.2653
6th International Islamic Finance Conference 2008 Peer Reviewed Paper
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