SCAPM (Shariah Compliant Asset Pricing Model); the Formula of Risk and Return Modification in Islamic Finance

Abstract

As an Islamic financial institutions into the capital market for investment, the guidance in the areas of risk and return and security prices under Shari'a framework necessary. Traditional CAPM is developed in an environment based on the interest (riba) is not in accordance with Islamic financial system. So that made the model estimates of the risks and return received by sharia models without changing the assumption of an existing model (CAPM). This research is expected to contribute in terms of risk and return assessment on investment of sharia, especially in Indonesia. The method in this research is exploratory through in approach literature studies about the model Capital Asset Pricing Model (CAPM) and explore studies on investmentsharia compliance issues to obtain the valuation model risk and return within the framework of sharia that is Shariah Compliant Asset Pricing Model (SCAPM).The results of this study indicate that Shariah Compliant Asset Pricing Model (SCAPM) is a modification of the model Capital Asset Pricing Model (CAPM), which has been explained that one of the basic assumptions of CAPM is no inflation. So in this study, the researchers did not use inflation but replacing the inflation factor to the rate of return on Certificates Sharia of Bank Indonesia (SBIS)