Portfolio Optimization between Conventional Stocks and Shariah Compliant Stocks
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Date
2019
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UMT.Lahore
Abstract
This study includes the comparison of performance among conventional stock and Islamic stock indices of Pakistan and also portfolio diversification among these stock indices. The Benchmark Index (KSE-100) and Shariah Index (KMI-30) have been taken for comparison. The monthly returns calculated for the time frame of July 2009 to December 2017. In order to compare the performance among these indices the measures used are Sharpe measure, Treynor measure and Jensen’s alpha. Similarly, Markowitz adjustment for Risk-Adjusted Return framework employed in order to achieve the optimal weights of the stocks in investment portfolios. The findings shows that the Benchmark index has greater performance than Islamic stock index. The conventional stock index has better opportunities for investment as the risk exposure is minimum by having maximum expected returns. Hence, the conventional stock index of Pakistan has a high potential for investment opportunities as compared to Islamic stock index and investors can have greater returns by investing in these stocks.