Evidence of Risk and Return Performance of Islamic Mutual Funds: The Case of Malaysia
Advances in Islamic Finance, Marketing, and Management
ISBN: 978-1-78635-899-8, eISBN: 978-1-78635-898-1
Publication date: 19 December 2016
Abstract
Purpose
This chapter compares the returns performance of the Islamic mutual funds (IMFs) with that of conventional mutual fund (CMF). It covers both pre- and post-ASEAN financial crisis and global financial crisis data for an overall sample of 128 IMFs and 350 CMFs. It also covers two market cycles from January 1995 to December 1998 and from January 2005 to December 2008.
Methodology/approach
The net raw returns of all expenses and market risk-adjusted return performance measurements are employed to examine the portfolios’ performance, and to capture the difference movement of the funds based on the particular market trend.
Findings
We observed that on average both portfolios outperform the market return. In general, average returns performance of IMFs is not better than the CMFs during bullish and bearish market trend periods. However, the empirical results based on time-series regression model reveal that the IMFs portfolio slightly outperform the conventional counterparts.
Practical implications
The study would benefit the investors and market players to consider IMFs in their portfolio selection, if in future such an expected event may occur.
Originality/value
The study provides insights to regulators and market players who plan to access investment plan in an emerging market, particularly in Malaysia.
Keywords
Acknowledgements
Acknowledgments
An initial version of this chapter was presented at the 3rd Global Finance Conference, 2015, at COMSAT, Lahore, Pakistan and the Islamic Accounting and Management Conference 2015, Glasgow University, United Kingdom. The authors are thankful for the constructive comments from M. Ariff, Masud Chudhury, M. Hudaib, and other participants.
Citation
Mansor, F. and Bhatti, M.I. (2016), "Evidence of Risk and Return Performance of Islamic Mutual Funds: The Case of Malaysia", Mutum, D.S., Butt, M.M. and Rashid, M. (Ed.) Advances in Islamic Finance, Marketing, and Management, Emerald Group Publishing Limited, Leeds, pp. 81-101. https://doi.org/10.1108/978-1-78635-899-820161006
Publisher
:Emerald Group Publishing Limited
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