Islamic finance benchmark : a possible solution revisited
Joint Authors
Azmi, Shawdari Wajahat Naim
Ali, Muhisn
Source
Journal of Islamic Business and Management
Issue
Vol. 4, Issue 2 (31 Dec. 2014), pp.115-126, 12 p.
Publisher
Riphah International University Riphah Centre of Islamic Business
Publication Date
2014-12-31
Country of Publication
Pakistan
No. of Pages
12
Main Subjects
Financial and Accounting Sciences
Religion
Islamic Studies
Topics
Abstract EN
Financial Assets’ pricing benchmarks serve multiple purposes in financial markets and hence play a critical role.
First, they serve as a reference point for pricing instruments ; second, they reflect the opportunity cost and third, they serve as a reference rate for the relative performance of investment portfolios.
Hence, a benchmark that is transparent, liquid, easy to calculate and non-manipulative is considered critical for the efficiency of financial markets.
Recent scandal of LIBOR’s manipulation by Barclays bank emphasizes the importance of a non-manipulative benchmark.
In this paper, we propose an alternative pricing model and show how it could work to serve the purpose of a potential benchmark for pricing.
This model was proposed by Abbas Mirakhor (1996) by utilizing the concept of Tobin’s Q2 to arrive at the cost of capital (CoC) without resorting to fixed interest rate.
We have empirically tested the model on Malaysian firms.
To arrive at the CoC, we derived Q-ratios at firm level and aggregated the same at the industry level.
Our findings suggest that the model proposed by Mirakhor (1996) can be used to estimate CoC in an interest free economy.
American Psychological Association (APA)
Ali, Muhisn& Azmi, Shawdari Wajahat Naim. 2014. Islamic finance benchmark : a possible solution revisited. Journal of Islamic Business and Management،Vol. 4, no. 2, pp.115-126.
https://search.emarefa.net/detail/BIM-601834
Modern Language Association (MLA)
Ali, Muhisn& Azmi, Shawdari Wajahat Naim. Islamic finance benchmark : a possible solution revisited. Journal of Islamic Business and Management Vol. 4, no. 2 (Dec. 2014), pp.115-126.
https://search.emarefa.net/detail/BIM-601834
American Medical Association (AMA)
Ali, Muhisn& Azmi, Shawdari Wajahat Naim. Islamic finance benchmark : a possible solution revisited. Journal of Islamic Business and Management. 2014. Vol. 4, no. 2, pp.115-126.
https://search.emarefa.net/detail/BIM-601834
Data Type
Journal Articles
Language
English
Notes
Includes appendix : p. 126
Record ID
BIM-601834