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.
