Are Islamic Stocks Less Exposed to Sentiment-Based Mispricing Than Non-Islamic Ones? Evidence from the Indonesian Stock Exchange

Al Hashfi, Rizqi Umar; Naufa, Ahmad Maulin; Munawaroh, U’um

doi:10.21098/jimf.v7i1.1319

Journal SINTA 1

Are Islamic Stocks Less Exposed to Sentiment-Based Mispricing Than Non-Islamic Ones? Evidence from the Indonesian Stock Exchange

Journal of Islamic Monetary Economics and Finance · Vol. 7 No. 1 (2021) · pp. 1–26

DOI: 10.21098/jimf.v7i1.1319
ISSN: 2460-6618, 2460-6146
Published: 2021-02-28
Publisher: Bank Indonesia
Language: eng

Abstract

The aim of this research is to verify the role of Islamic value in stock mispricing in the Indonesian capital market. Empirically, high investor sentiment can lead to mispricing on equity appraisal. When investors feel excessively optimistic about their valuation, equity will be overpriced, or vice versa. The presence of Islamic values, such as the prohibition of interest, speculative and uncertain transactions, and excessive leverage, arguably reduce sentiment-based mispricing. Daily and cross-sectional market data were employed. In addition, principal component analysis was conducted to construct a firm-specific investor sentiment variable. With regard to the method, the Hausman-Taylor (H-T) approach was used to deal with heterogeneity, endogeneity, and the time-invariant variable in Fama-MacBeth regression. The results show that our baseline analysis confirms the mispricing of overall stocks. However, Islamic stocks are less exposed to sentiment-based mispricing than their non-Islamic counterparts. The results are consistent with our robustness test, in which we estimate the equation model across industry and portfolio. Finally, our findings imply various insights for both investors and policymakers.

Keywords

Collaboration network of the authors

14 authors · 24 co-authorship links

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Kobe University
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Co-author	Organisation	Joint articles
Sunarsih Sunarsih	Affiliation unknown	2
Endang Suhari	Affiliation unknown	2
I Wayan Nuka Lantara	Kobe University	1
Mamduh M. Hanafi	Affiliation unknown	1
Bowo Setiyono	Affiliation unknown	1
Abdul Qoyum	Affiliation unknown	1
Izra Berakon	Affiliation unknown	1
Nor Nabilla Muhammad	Affiliation unknown	1
Alyta Shabrina Zusryn	Affiliation unknown	1
Novi Lailatul Khoirunnisa	Affiliation unknown	1
Ammelia Rizza Fitri Ayu Listyowati	Affiliation unknown	1

Affiliations come from OpenAlex; journal OAI-PMH metadata carries none. Authors without an OpenAlex ID are matched by name, which can merge or split people.

Metadata source: OAI-PMH (metadata jurnal) http://www.jimf-bi.org/index.php/JIMF/oai, first harvested 9 Nov 2026, last seen 9 Nov 2026.

Original metadata (oai_dc)

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	<dc:title xml:lang="en">Are Islamic Stocks Less Exposed to Sentiment-Based Mispricing Than Non-Islamic Ones? Evidence from the Indonesian Stock Exchange</dc:title>
	<dc:creator xml:lang="en">Al Hashfi, Rizqi Umar</dc:creator>
	<dc:creator xml:lang="en">Naufa, Ahmad Maulin</dc:creator>
	<dc:creator xml:lang="en">Munawaroh, U’um</dc:creator>
	<dc:subject xml:lang="en">Mispricing</dc:subject>
	<dc:subject xml:lang="en">Sentiment</dc:subject>
	<dc:subject xml:lang="en">Return</dc:subject>
	<dc:subject xml:lang="en">Islamic values</dc:subject>
	<dc:description xml:lang="en">The aim of this research is to verify the role of Islamic value in stock mispricing in the Indonesian capital market. Empirically, high investor sentiment can lead to mispricing on equity appraisal. When investors feel excessively optimistic about their valuation, equity will be overpriced, or vice versa. The presence of Islamic values, such as the prohibition of interest, speculative and uncertain transactions, and excessive leverage, arguably reduce sentiment-based mispricing. Daily and cross-sectional market data were employed. In addition, principal component analysis was conducted to construct a firm-specific investor sentiment variable. With regard to the method, the Hausman-Taylor (H-T) approach was used to deal with heterogeneity, endogeneity, and the time-invariant variable in Fama-MacBeth regression. The results show that our baseline analysis confirms the mispricing of overall stocks. However, Islamic stocks are less exposed to sentiment-based mispricing than their non-Islamic counterparts. The results are consistent with our robustness test, in which we estimate the equation model across industry and portfolio. Finally, our findings imply various insights for both investors and policymakers.</dc:description>
	<dc:publisher xml:lang="en">Bank Indonesia</dc:publisher>
	<dc:date>2021-02-28</dc:date>
	<dc:type>info:eu-repo/semantics/article</dc:type>
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	<dc:type xml:lang="en">Peer-reviewed Article</dc:type>
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	<dc:identifier>https://jimf-bi.org/JIMF/article/view/1319</dc:identifier>
	<dc:identifier>10.21098/jimf.v7i1.1319</dc:identifier>
	<dc:source xml:lang="en">Journal of Islamic Monetary Economics and Finance; Vol. 7 No. 1 (2021); 1 - 26</dc:source>
	<dc:source>2460-6618</dc:source>
	<dc:source>2460-6146</dc:source>
	<dc:source>10.21098/jimf.v7i1</dc:source>
	<dc:language>eng</dc:language>
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