Islamic Financing vs the Capital Asset Pricing Model (CAPM) Essay

The research denomination discusses two approaches, one regularity is Moslem finance and other is the courtly capital asset determine model (CAPM). Using the direct Musharakah, Islamic financing method is use against the conventional financing method by comparing each other. comparison the two approaches has drawn several findings it is found that the beta-risk is lower on investments, which be found on the partnership of Islamic financing as compared to the conventional market. The risk is on the share of the lenders and others but not on the risk-return. sense of balance exists between the relative risk and the share of lender, furthermore, it is also discussed in the word that Islamic financing is not establish on the fixed and regulate rate of interest, prediction of inflation in future and the partnerships, which are based on the minimum risk with maximum return. Islamic financing is paste with the growth rate of 23% annually and many Islamic financing banks and i nstitutions are working all over the world. The primary objective of this article is to lay down the hypothetical framework, which discusses the Profit and loss sharing based on Islamic principles with the investment of interest free partnership. According to the author, Islamic financing is based on the risk that is beard by the some(prenominal) parties. On the time of investment, whether agents ware shortage or surplus of resources, they have to share the returns and risk on the investment they are making. General concepts of Islamic financing instruments like Mudarabah, Musharakah, Murabahah, Al-Salam and Al-Ijara are based on the mechanism of meshing and loss sharing (PLS). All of these above mentioned partnerships are based on the agreed upon the subsequent loss or th... ...anagement of the stock portfolios, implementing an Islamic CAPM would at long last result in more satisfying results that can potentially sustain generous income for the investor. Works Cited Hanif, M. and U. Bhatti, 2010. Validity of CAPM Evidence from KSE. European Journal of Economics, pay & Administrative Sciences, Issue 20, pages 148-161.Selim, T. H. (2008). An Islamic capital asset pricing model. Humanomics, 24(2), 122-129.Hanif, Muhammad and Dar, Abubakar Javaid, comparative Testing of Capital Asset Pricing Model (CAPM) and Sharia amenable Asset Pricing Model (SCAPM) Evidence from Karachi Stock Exchange - Pakistan (November 18, 2011). fourth South Asian International conference (SAICON-2012), Pearl Contenental Hotel, Bhurban, Pakistan, 05-07 December, 2012. Available at SSRN http//ssrn.com/abstract=1961660 or http//dx.doi.org/10.2139/ssrn.1961660