Determinants of Stock Returns In Islamic Banks

The purpose of this paper is to examine the determinants of stock returns of Islamic banks. We use the Capital Asset Pricing Model (CAPM) and Fama and French model. In this study, we employ sample composed by 14 Islamic banks during the period from March 31, 2004 to March 18, 2014. We devise the period of study into three periods before the crisis (from March 31, 2004 to December 31, 2007), during the financial crisis of 2008 (from January 01, 2008 to December 30, 2011), and after the financial crisis (from January 02, 2010 to March 18, 2014). The empirical results show that the market risk (Mkt) has a negative impact on stock return of banks characterized by small sizes and a positive impact on banks with big sizes in the case of two models; CAPM and Fama and French. The risk of size (SMB) has a positive impact on small Islamic banks and a negative impact on banks with big sizes. Finally, the risk related to the market value (HML) has a positive impact on small and large Islamic banks.