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Is there a Ramadhan effect on Sharia mutual funds? Evidence from Indonesia and Malaysia

Rofikoh Rokhim (Department of Management, Universitas Indonesia, Depok, Indonesia)
Irma Octaviani (Postgraduate Program, Universitas Indonesia, Depok, Indonesia)

International Journal of Islamic and Middle Eastern Finance and Management

ISSN: 1753-8394

Article publication date: 19 December 2019

Issue publication date: 17 February 2020

583

Abstract

Purpose

This paper aims to examine whether Sharia mutual fund managers are able to gain abnormal returns from what is called the Ramadhan effect.

Design/methodology/approach

The authors use GARCH regression on daily data of domestic Sharia mutual fund performance in Indonesia and Malaysia over the period of 2007-2017.

Findings

The authors find that the Ramadhan effect is not a strong predictor of Sharia fund excess return in Indonesia and Malaysia, and they identify a positive Ramadhan abnormal return on the Malaysia Sharia Equity Fund. This result shows there is size effect on sharia fund excess return in Indonesia and value effect on Sharia Balanced Fund in both markets. It is suggested that the effect of market excess return in Indonesia is stronger than in Malaysia.

Research limitations/implications

The samples are limited to Sharia Funds over the period 2007-2017.

Practical implications

The authors suggest that size and value effect could be considered to develop the selection and timing strategies to explore the Ramadhan effect.

Originality/value

This study focuses on Indonesia and Malaysia, the two largest Islamic Stock Markets in Southeast Asia and examines specific on Sharia Mutual Fund (equity and balanced fund). It also compares differences in total performance measures between the Ramadhan period and non-Ramadhan period.

Keywords

Citation

Rokhim, R. and Octaviani, I. (2020), "Is there a Ramadhan effect on Sharia mutual funds? Evidence from Indonesia and Malaysia", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 13 No. 1, pp. 135-146. https://doi.org/10.1108/IMEFM-04-2019-0147

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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