Fundamental anomalies within shariah-compliant Malaysian stock market
List of Authors
  • Nadhirin, N. F. S. M. , Yusoff, Z. Z. M.

Keyword
  • Size Anomaly, Value Anomaly, EMH, Shariah-Compliant Stock

Abstract
  • The purpose of this paper is to investigate the presence of the fundamental anomalies (i.e., size and value anomaly) in the Shariah-compliant Malaysian stocks and its implications for the fund managers. Cross-sectional data was obtained from Shariah-compliant listed companies across eleven (11) sectors from the Bursa Malaysia Sectorial Index Series in 2023. The study was subjected to the Sharma and Jain (2020) that utilized the Welch's t-test for the exploration of the size and value anomalies. Two portfolios were created based on the market capitalization and price-to-book ratio of the companies. In addition, the average abnormal returns were calculated to assess any significant differences amongst the portfolios. The results indicate that the size and value anomalies exist in several sectors in Shariah-compliant Malaysian stocks market. The findings proved that the market is inefficient in the Efficient Market Hypothesis (EMH) semi-strong form, since investors can potentially make profits using the anomalies identified by the publicly traded companies’ financial ratios. The implication to the fund managers in creating investment portfolios based on the anomalies examined, especially for those who wish to participate in Shariah-compliant stocks market. The paper attempts to close the research gap about the size and value anomalies on the individual Shariah-compliant stock. The paper adds to the current literature on fundamental anomalies that involve various sectors.

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