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This paper aims to examine the performance of Islamic and conventional stocks listed at the Pakistan Stock Exchange by using both parametric and non-parametric approaches. The motivation is to do risk-return analysis of Islamic stock prices and conventional stock prices.

It uses various measures of performance, e.g. Sharpe ratio, Treynor ratio, Jensen's alpha, beta, generalized auto-regressive conditional heteroskedasticity and stochastic dominance. Using the Karachi Meezan Index-30 (KMI-30) and the Karachi Stock Exchange Index-30 (KSE-30) as proxies for Islamic and conventional stock prices, respectively, it examines the performance of Islamic and conventional stocks. The daily data of KMI-30 and KSE-30, covering period from June 9, 2009 to June 20, 2020 are used.

The results show that the overall KMI-30 outperforms the KSE-30. The returns of the KMI-30 are greater than the KSE-30. However, the risk and volatility of the KMI-30 and KSE-30 are similar. Further, the KMI-30 has higher excess returns per unit of total risk than the KSE-30. But both indexes have similar excess returns per unit of systematic risk. Moreover, the KMI-30 returns have stochastically dominance over the KSE-30 returns. These results reveal that the Islamic index performs better than the conventional index.

The findings provide several practical implications in financial and investment decisions making by investors, managers and policymakers such as strategies for asset allocation and investment. Further, in risk management, it provides guidance for allocating portfolios and managing risk. The investment in Islamic stocks may mitigate potential risk within asset portfolios.

This research is unique in its approach to the analysis of the performance comparison of conventional and Islamic stock by using comprehensive parametric and non-parametric estimation techniques. Such research has not been undertaken in the Pakistan's equity market since.

The purpose of this study is to develop a precise Islamic securities index forecasting model using artificial neural networks (ANNs).

The data of daily closing prices of KMI-30 index span from Aug-2009 to Oct-2019. The data of 2,520 observations are divided into training and test data sets by using the 80:20 ratio, which corresponds to 2016 and 504 observations, respectively. In total, 25 features are used; however, in model selection step, based on maximum accuracy, top ten indicators are selected from several iterations of predictive models.

The results of feature selection show that top five influencing indicators on Islamic index include Bollinger Bands, Williams Accumulation Distribution, Aroon Oscillator, Directional Movement and Forecast Oscillator while Mesa Sine Wave is the least important. The findings show that the model captures much of the trend and some of the undulations of the original series.

The findings of this study may have important implications for investment and risk management by using index-based products.

Numerous studies proved that traditional econometric techniques face significant challenges in out-of-sample predictability due to model uncertainty and parameter instability. Recent studies show an upsurge of interest in machine learning algorithms to improve the prediction accuracy.

The purpose of this paper is to bring the attention of Muslim world toward uniformity of Shariah principles. The paper also presents different opinions of experts toward standardization. Selection criteria of four different Islamic market indices are compared. Some points like Halal business and debt ratio are common, while others are different.

The qualitative research method has been used in this research work and various types of documents and research articles were analyzed. The authors analyzed the data of four Islamic stock markets in the world. First, they write all the screening criteria of every Islamic stock market for selecting a company for their stock market. Afterwards, they make a table that presents the comparison of screening criteria of all Islamic market indices.

A Shariah Board of Islamic Market approves any company as being Islamic Shariah-compliant based on certain criteria. Different Islamic market indices use their own criteria for selecting the company. Every Islamic market index has its own rules and regulations of the Shariah Board. Sometimes these rules are contradictory with each other; for example, if KMI-30 Islamic index is not selecting one particular company due to higher debt ratio but Dow Jones Islamic market index selects that company because that company meets the criteria of the Dow Jones Islamic market index.

The main limitation is that there is no approach to regulators of the different Islamic market indices around the globe.

If Islamic indices work on the suggestions provided in this paper, standardized criteria will be available to all indices and, consequently, confidence of the investors and operational issues will be resolved. Investment will be increased.

The belief of non-Muslims will be strong that Islamic laws are the same any where. A shift from conventional finance to Islamic Finance will be sped up.

This research work is original and first attempt on the topic of standardization of screening criteria of Islamic stock markets around the globe.

This study aims to understand and document the impact of market-based – market returns and momentum – as well as firm-specific – size, book-to-market (B/M) ratio, price-to-earnings ratio (PER) and cash flow (CF) – factors on pricing of Shari’ah-compliant securities as explanation of variations in stock returns in an emerging market – Pakistan’s Karachi Stock Exchange.

Initially, the authors test Fama and French (FF) three-factor model – market risk premium, size and B/M – followed by modified FF model by including additional risk factors (PER, CF and momentum) over a 10-year period (2001-2010).

Our results support superiority of FF three-factor model over single-factor capital asset pricing model. However, addition of further risk factors – including PER, CF and momentum – improves explanatory power of the model, as well as refines the selection of risk factors. In this study, CF, B/M and momentum factors remain insignificant. Traditional B/M factor in FF model is replaced by PER.

Based on the modified FF model, the authors propose a stock valuation model for Shari’ah-compliant securities consisting of three factors: market returns, size and earnings, which explains 76per cent variations in cross sectional stock returns.

To the best of the authors’ knowledge, this is the first study (which combines market-based as well as fundamental factors) on pricing of Islamic securities and identification of risk factors in an emerging market – Karachi Stock Exchange.

The purpose of this study is to investigate empirically the trade credit financing as antecedents to firm performance in Pakistan, a transition economy having high level of openness in environment using sample data from firms following Sharia principles using Sharia compliance principles.

This study investigated the significance of the trade credit behavior in influencing financial performance of nonfinancial firms which have adopted Sharia principles in their business activities by incorporating feasible generalized least square estimator technique on panel data model from 2010 to 2020. The variables data was extracted from the Pakistan Securities Exchange website for the period 2010–2020. Meanwhile, this study has also taken into consideration the role of bank size in shaping the relation under consideration.

The statistical outcomes from the used model support the strong impact of the existence of trade credit in determining a firm’s financial performance. Results also highlight that profitable firms with high involvement in trade credit can boost their performance by optimal utilization of trade credit sources. However, the acquisition of bank loans for firms having no operational needs can disturb their financial health and ultimately threaten performance. This relationship is more evident for large-size firms.

The given analysis suggests the managers from the corporate sector that before making any arrangements for trade credit, they must have to compare the availability of the financing structure from bank as it offers a strong monetary back for any financial imbalance.

Briefly, to the best of the authors’ knowledge, this study would be the first to address the trade credit behavior keeping in view the sample data from firms following Islamic Shariah principles using SAC quantitative approach. Further, the proven analysis demonstrates novel contribution that efficient use of trade credit (based on Islamic Shariah principles) into business activities might strengthen corporate firms’ financial efficiency.

This study aims to investigate the effect of Shariah-compliant status and Shariah regulation on initial public offering (IPO) underpricing in Pakistan.

Besides the ordinary least square’s method, this study used quantile least squares as a robust approach and stepwise regression for further analysis to investigate the underpricing phenomenon in Pakistan. Data of 84 IPOs listed on Pakistan Stock Exchange from January 2000 to December 2018 were collected to determine the impact of Shariah-compliant status and Shariah regulation on IPO underpricing.

Results of the study show that Shariah-compliant status has a negative relationship but Shariah regulation has a positive relationship with IPO underpricing. Hence, it is contended that Shariah-compliant firms have lower asset volatility and uncertainty than non-Shariah-compliant firms because of less information asymmetry, resulting in lower underpricing. These Shariah-compliant firms provide signals of high-quality IPOs as they must comply with the strict guidelines issued by the Securities Exchange Commission of Pakistan in addition to being considered as amicable by investors. Further, this study suggests that investors are more attracted to Shariah-compliant firms than non-Shariah-compliant ones.

This study’s offers limited consideration of nonfinancial and financial characteristics that could influence the decision of investors to subscribe to IPOs. Besides, future studies could consider the screening benchmarks; for instance, debt and cash may explain the intensity of IPO initial return in Pakistan.

The present work empirically investigated the influence of Shariah-compliant status and Shariah regulation on IPO underpricing in Pakistan’s IPO market, which has been scarcely covered in the existing literature.

This paper aims to develop a ranking methodology for the companies included in the Islamic indices in Turkey. Thus, this paper simplifies the decision-making process for investors with Islamic sensitivities to stock market investment when constructing their investment portfolio.

This paper uses a case study of 20 companies listed on Borsa Istanbul, drawing data from their 2017, 2018 and 2019 financial reports. These companies are scored and ranked according to their compatibility with the screening criteria used by Ziraat Katilim index in Turkey. In addition, this paper uses the quantitative screening process to calculate the ranking scores of these companies.

The findings show that some companies are highly compatible with the screening criteria, with ranking scores close to 100 points. However, some companies satisfied the criteria on the margin. This may not be a desirable result for some investors.

Only 20 companies are included in the analysis. Since the conventional accounting system is used in Turkey, it was difficult to get exact information about the companies’ Sharīʿah compatibility from the financial results.

The findings assist investors to determine which company is ethically more responsible than others within the Islamic framework. There are also implications for the companies in question, index providers and Sharīʿah scholars.

The findings aim to simplify the decision-making process of investors who have Islamic sensitivities to stock exchange market investment when they constitute their portfolio.

To the best of the authors’ knowledge, it is one of the first attempts to develop a ranking methodology for Sharīʿah-screened stocks in Turkey even though Sharīʿah screening has been on the agenda since the late 1990s. This paper also compares 11 indices based on their screening criteria.

The purpose of this study is to look at how Shariah-compliant status and Shariah regulation affect the demand for initial public offerings (IPOs) in Pakistan. The Shariah-compliant status, which is seen as a method that offers a credible signal to investors, may explain the anomaly in IPO demand.

This research used multivariate and quantile regression models to assess data from 85 IPOs issued on the Pakistan Stock Exchange between 2000 and 2019.

Shariah-compliant status has a considerable negative association with IPO demand. Nevertheless, there is a considerable positive association among Shariah regulation and IPO demand. Furthermore, the interaction among regulatory quality and Shariah-compliant status has a considerable strong influence on IPO demand. As a consequence, the findings show that Shariah-compliant firms might possibly attract the attention of investors. Investors were found to concur on the amicability of rigorous rules and permissible Shariah-compliance aspects.

Future studies could analyse the financial ratio benchmark (cash and debt) to determine the Shariah-compliant status and Shariah regulation to better understand the problem of IPO demand in the context of Pakistan.

The outcomes of this research are useful for issuers and underwriters in comprehending the characteristics that influence high and early IPO success. Such knowledge may assist issuers and underwriters in responsibly planning and managing the IPO process.

The results may be useful to investors looking for critical information in prospectuses to make the best choice when subscribing to IPOs in Pakistan.

This is one of the first studies to provide empirical data on the links among Shariah-compliant status, Shariah regulation and IPO demand in Pakistan. Furthermore, this research demonstrates the interaction impact of regulatory quality and Shariah-compliant status on IPO demand.

The purpose of this study is to highlight key issues pertaining to making use of Islamic equity indices and proposing possible solutions to address the problems faced in advancement of the concept of Shariah investing (SI) with the aim to advance the discourse on the subject.

Online focus group discussion (FGD) was carried out in which ten Islamic finance researchers and analysts belonging to institutions considered as authority on the subject matter participated to share their viewpoints on Islamic equity indices. Content analysis on the collected data of FGD was carried out which has revealed six key themes.

Six broader themes were identified based on the analysis of FGD, which includes criteria for constructing Islamic equity indices, utilization of Islamic equity indices for comparison with conventional stock indices, stock market efficiency perspectives, reason for integration of different equity markets, investors’ awareness of SI and future directions of Islamic equity indices. Results of the study indicate that Islamic finance researchers and analysts opined that there is a need for revising the criteria for construction of Islamic equity indices. There are conflicting viewpoints regarding performance and efficiency of Islamic indices in comparison with conventional indices and main reasons for stock market integration are trade liberalization, globalization and other factors. Moreover, there is a need for making investors and other market players aware about the attractiveness of Islamic indices from investing point of view.

Based on this extensive literature review and as highlighted by Masih et al. (2018) in their recap of literature on Islamic equity indices indicating that there are bulk of empirical studies carried in the past in the domain, however, there is a dearth of theoretical and qualitative studies. Hence, this preliminary qualitative study not only makes theoretical contribution but also deploys FGD, which is rarely used in the similar context, and offers candid views of the participants on key issues pertaining to Islamic equity indices. This lends novelty to this study.