Are Islamic stock returns predictable? A global perspective

Paresh Kumar Narayan, Dinh Hoang Bach Phan, Susan Sunila Sharma, Joakim Westerlund

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59 Citations (Scopus)


Using the sharia-compliant measures, we compile a data set that spans January 1981 to December 2014 and contains 2577 Islamic stocks. Using as many as 12 financial and macroeconomic predictors, we discover strong evidence of both in-sample and out-of-sample return predictability. There is robust evidence of predictability only when U.S. stock returns are used as a predictor. We find that investing in regional (industry) portfolios offers on average, across the 12 predictors, meaningful profits of 6.16% (6.03%) per annum. Investing in a portfolio of Islamic stocks belonging to emerging markets (9.89% per annum) and a portfolio of Islamic stocks belonging to the consumer goods sector (6.37% per annum) offers the most returns amongst regions and industries, respectively.

Original languageEnglish
Pages (from-to)210-223
Number of pages14
JournalPacific Basin Finance Journal
Publication statusPublished - Dec 2016
Externally publishedYes


  • Islamic stocks
  • Predictability
  • Profits
  • Returns

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