Author(s): Nawaf Abuoliem, Baliira Kalyebara & Che Wan Suraya Che Wan Ibrahim
This paper investigates whether Shariah-compliant firms outperform conventional peers in the Malaysia stock market in terms of firm value optimization and 1/N rules, during the recent financial instability period due to the COVID-19 pandemic. Data of 12 of Shariah-compliant portfolios and 12 of conventional portfolios for the seventeen (17) months period from 1st January 2020 to 31st May 2021 were collected. The paper investigates the performance of both sets of portfolios using optimization model under unconstrained, constrained and maximizing Sharpe-ratio strategy and 1/N rules. The results show that Shariah-compliant firms outperform conventional firms in terms of risk minimizing (variance: σ2) and are able to provide competitive returns although lower than conventional counterparts. The findings from the study provide several implications for investors in many ways, especially in investment decisions to consider investing in Shariah-compliant or conventional portfolios.