SYARIAH AND CONVENTIONAL STOCK PERFORMANCEOF PUBLIC COMPANIES LISTED ON INDONESIA STOCK EXCHANGE

Abstract

Shifting in the investment preferences from conventional to Syariah finance has been an emerging trend during the past two decades. However, there is a general pessimistic view that Syariah based investors are likely to earn returns below the market returns. This study aims to examine two issues. Firstly, whether there is a significant difference in risk and returns between Syariah stocks and conventional stocks of selected public companies listed on Indonesia Stock Exchange (IDX) during the period of 2009-2011; and secondly, whether there are significant relationships between stock returns and financial ratios of both selected Syariah and conventional stocks. Using independent samples Ttest and Mann Whitney U-test, the result shows no evidence of significant statistical differences in cumulative returns, standard deviation and beta between Syariah and conventional stocks. Moreover, this research employs risk-adjusted return measurement consisting of Sharpe ratio, Treynor ratio and Jensen’s Alpha to assess the performance of Syariah and conventional stocks portfolios. The result indicates that risk-adjusted return of both stocks’ portfolio is performed in a similar manner. Finally, using multiple regression analysis, the research finds that the financial ratios are simultaneously proven to have significant relationship with both of Syariah and conventional stocks returns.