The Klse Syariah Index: A Performance Evaluation And The Impact Of Stocks Delisting On Securities Prices
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Date
2002-05
Authors
HJ. IBRAHIM, HASLINDAR
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Abstract
Though preliminary in nature, this study is a breakthrough in the Islamic
Capital Market (ICM) research. It attempts to evaluate the performance of the Kuala
Lumpur Stock Exchange Syariah Index (KLSE SI) against the Kuala Lumpur Stock
Exchange Composite Index (KLSE CI). In addition, the impact of delisting on stock
prices from the KLSE SI counters was also investigated. The study covered the
period 21 April 1999 to 31 January 2002. Besides looking at the whole period, we
also partition the period into two phases i.e. growing and declining phases of the
market. The Adjusted Sharpe Index (AS I), the Treynor Index (TI), and the Adjusted
Jensen's Alpha Index (AJAI) have been used to examine their performance. Besides,
the daily closing prices of 52 delisted firms were used in order to study the impact of
delisting event on the behavior of prices. The event study methodology has been
used to analyze the above. Two windows were used in this study i.e. 29 days and 61
days surrounding the event, to check the robustness of the results. The results
showed that there was no significant difference in mean returns between the KLSE
SI and the KLSE CI for the period of the study. Comparing the performance using
the three traditional measures of the ASI, TI, and AJAI, revealed that the KLSE CI
performed slightly better than the KLSE SI for the overall and declining periods.
However, during the growth phase, the KLSE SI has slightly higher value for all the
measures. As the performance of the KLSE SI and the KLSE CI generally did not
differ, we argue that being a component stock in the KLSE SI would not be a special
privilege. Thus, being delisted from the KLSE SI would not affect stocks prices.
Event study on the effect of delisting showed that generally, the abnormal returns of
delisted firm were not significantly different from zero. This may support the results
in the first test, whereby the perfonnance is not different if stocks were being
delisted from the KLSE SI counters.
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Keywords
The Klse Syariah Index: A Performance Evaluation , And The Impact Of Stocks Delisting On Securities Prices