Developing Shari'ah-Compliant Asset Pricing Model in the framework of Maqasid al-Shari'ah and Islamic Wealth Management

Abstract

This article offers a conceptual framework for developing the Shari'ah-Compliant Asset Pricing Model using the Maqasid al-Shari'ah and Islamic Wealth Management. This article also provides a new perspective on finding Islamic financial benchmarks as an alternative to conventional financial benchmarks in the Islamic finance industry. This research was conducted using a qualitative research method with deep reference to published journal articles and books in the fields of Maqasid al-Shari'ah, Islamic Wealth Management, and asset pricing model. As a measure of the expected minimum rate of return in an asset pricing model, this article proposes the fulfillment of basic necessities (dharuriyyat) and zakat rate as a proxy for investors' required rate of return. This study acknowledges both systematic and non-systematic risk effects on asset pricing.