Portfolio Formation Using Islamic- Approved Stock in Malaysia

Abstract

The study attempts 10 provide evidence of the effectiveness of portfolio using Islamic-approved stocks Kuala Lumpur Stock Exchange (KLSE). Using the techniques developed by Elton, Gruber (1976), the process of stock selection and portfolio are performed using sample 156 with daily data running from Apri 1999 to October 2001. overall, only 5 companies are form an equal-weighted portfolio. The short-term performance of the, portfolio is evaluated and Jensen Indices. The results show that the simple techniques used in this study is able optimal porolio using Islamic-approved stocks that outperform the market. Nonetheless, research is necessary to determine the robustness of this technique.