Title: Zero interest rates and cross-section of stock returns

Authors: Moustafa Abuelfadl

Addresses: School of Business, Ithaca College, 953 Danby St, Ithaca, NY 14850, USA

Abstract: The paper presents a theoretical market system based on the tenets of Islamic finance where the underlying assumption is zero interest rate. The paper used β < 1 as a criterion for zero interest rate assumption for the theoretical market system. The paper finds using multivariate analysis on portfolios sorted on β < 1, that cross section of stock returns can be explained using a parsimnious model that incorporates both behavioural finance and fundamental finance factors.

Keywords: Islamic finance; zero interest; behavioural finance; fundamental finance; beta.

DOI: 10.1504/IJBD.2017.088497

International Journal of Bonds and Derivatives, 2017 Vol.3 No.3, pp.183 - 203

Received: 26 Sep 2016
Accepted: 26 Oct 2016
Published online: 11 Dec 2017 *

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