DO SHARIAH STOCK MARKET INDICES PERFORM BETTER THAN NON-SHARIAH STOCK MARKET INDICES: A CASE STUDY OF BANGLADESH AND PAKISTAN STOCK MARKETS

Abstract

This paper is based on the empirical evidence of comparative study of Shariah and non-Shariah stock market indices of Bangladesh and Pakistan stock exchanges. The primary objective of the research is to investigate which index performs better in terms of risk and returns trade off. For Bangladesh stock market, DSES and DSEX represent Shariah and non-Shariah stock market indices respectively. Similarly, for Pakistan stock market, KMI-30 and KSE-30 are the symbol of Shariah and non-Shariah indices. Panel data analysis is used by obtaining secondary source of data from the period January, 2015 to June, 2021 with weekly frequency for both of the markets. The POLS, REM and FEM models are applied. Findings have proved that non-Shariah index performs better than Shariah index in DSE, whereas as per PSX data, Shariah index outperforms than non-Shariah index. Besides, results proved that most of the investors move from unrestricted market to restricted market in PSX, but, however, it is not witnessed in DSE. The implication of this research assists investors to make their rational decisions and make portfolios in order to get maximum returns with least amount of risk.