A Comparison of Net Returns of Equities in the Qatar Stock Exchange

The purpose of this research is to provide investors with a better understanding of the Shariah views on investing in equities generally and insights into the returns of the different stock classes in the Qatar Stock Exchange. There are three levels of stock classes in Islamic markets – pure stocks (stocks with fully compliant activities that require no purification of returns), mixed stocks (stocks with compliant main activities that deal with some impermissible activities and require purification of returns), and impermissible stocks (stocks with non-compliant main lines of businesses that are not allowed to be traded in). The thesis starts with a discussion of the various Shariah views on investing in equities in addition to the Shariah views on the investing strategies. While impermissible activities of mixed-stock companies can include any type of impermissible activity, such as dealing with alcohol, pork or interest, the discussion will shed more light on interest since that is the main source of impermissible income for mixed-stock companies on the QSE. The next portion of the thesis includes the numerical findings. The analysis will focus on calculating the average returns – dividend, price and total returns – for the different classes of stocks over the period of 2010-2019 through the ""buy and hold"" investment strategy rather than speculation. The thesis tests two hypotheses: (1) Pure stocks of the QSE will yield the highest total returns as compared to the other classes, and (2) Pure stocks will outperform their mixed counterparts from both a price returns and dividend returns perspective. The findings from our research confirm both hypotheses. Pure stocks of the QSE do in fact yield the highest total returns, and that is attributed mainly to price appreciation. Pure stocks of the QSE also outperform their mixed counterparts on every return metric. Thus, it can be concluded that for the period for which robust data is available for QSE listings (2010-present), pure stocks deliver the greatest total return