Islamic three factor asset pricing model: An application on participation index

Fama French Change in stock return by Three Factor Asset Pricing Model; The excess return on the market's risk-free interest rate is explained by the ratios and the DD / PD ratios. The main aim of this study is to test the validity of the Fama French Three Factor Asset Pricing Model in Islamic finance. It is also aimed to compare the results of the Traditional Fama French Three Factor Asset Pricing Model in the study with the results of the Islamic Fama French Three Factor Asset Pricing Model. In line with this aim, each year between 2011 and 2017, which is included in the KATLM-30 index, 25 share certificates, which are positive in nature and accessible to uninterrupted data, are taken at the end of December. Two separate market portfolios BİST100 and KATLM30 were taken in the study. Islamic Fama French Inflation was obtained instead of the interest rate for the creation of the Three Factor Asset Pricing Model. The monthly data of the stocks obtained were analyzed by the regression analysis method. As a result of the research, the Fama French Three Factor Asset Pricing Model is applied to Islamic financing but not for the period concerned. In the traditional Fama French Three Factor Asset Pricing Model, it has been determined that the market portfolio is valid for the SH, BL, BM and BH portfolios in the model received from BİST100.