Degree
Master of Science in Islamic Banking & Finance
Department
Department of Finance
Faculty/ School
School of Business Studies (SBS)
Date of Submission
Spring 2022
Supervisor
Dr. Irum Saba, Associate Professor & Program Director MS-IBF, Institute of Business Administration, Karachi
Keywords
Pakistan Stock Exchange, Karachi Meezan Index (KMI), Shariah Compliance, Islamic Capital Market
Abstract
This project report seeks to analyze the impact of recomposition of Shariah Index on the returns of stocks. This study investigates the effect of the inclusion and exclusion of stocks in the KMI All Share index on their share price/returns. The quantitative approach has been applied, and secondary data available on Pakistan Stock Exchange data portal was used. The sample data is obtained for three years (from July 15, 2019, till January 03, 2022) with semiannual recomposition totaling 139 inclusions and 132 exclusions from the KMI-All Share Index on Pakistan Stock Exchange.
The methodology used in this study to analyze the risk and returns of the stocks included or excluded from the KMI-All Share Index, to evaluate the impact on the volumes of KMI – All Share before and after the event of a change of Index, and on the return and volatility of the KMI-All Share Index is event study technique to determine Cumulative Abnormal Returns (CAR) of stocks. The study finds out that included stocks and excluded stocks do not show significant changes in their returns and share prices due to the event under consideration; moreover, its impact on volumes, returns, and volatility of the KMI-All Share Index remains insignificant. It is recommended that the regulator i.e., SECP should provide incentivization to the Shariah-compliant companies. Moreover, SECP and PSX should focus on creating awareness amongst the investor about the Shariah-compliant products and services in the PSX while also providing incentives including relaxation in tariffs and Capital Gains tax, etc. which would help increase the investor base and promote Islamic Capital Market in Pakistan.
Document Type
Restricted Access
Submission Type
Research Project
Recommended Citation
Sikander, S. (2022). Impact of recomposition of the KMI-All Share Index on the performance of stocks and on the Index (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/etd-ms-ibf/60
