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This paper analyzes alternative performance evaluation models applied to equity mutual funds under conditional and unconditional approaches in the Brazilian market.

The analysis is conducted using CAPM's single factor, Fama–French three and five factors, under their conditional and unconditional versions in a sample of 896 equity mutual funds from 2008 to 2019.

The results suggest that the use of three- or five-factor models is especially relevant to reduce the effect of market anomalies in performance assessment. Additionally, results show that conditional approaches, adding time-varying alphas and betas with macroeconomic variables, provide higher explanatory power than their unconditional peers.

The results are relevant in the unique economic environment characterized by historically high interest rate and high market volatility.

This study introduces a new type of platform recommendation about mutual funds and draws on the signaling theory to conduct a quasi-experimental design to investigate how the platform recommendation influences investors’ investment decisions. Moreover, the authors examine the combined effect of star ratings and the platform recommendation on fund flow and test the investment value of recommended funds.

This study implements a quasi-experimental design based on 1,295 mutual funds traded on Alipay’s online platform to test the hypotheses.

The empirical results show that the recommended funds received higher fund flows from investors when the platform recommendation was established. Moreover, a substitution effect between tag recommendation and star ratings on fund flow was identified. We also uncovered that investing in platform-recommended funds can yield significant and higher fund returns for investors than those without platform recommendations.

Our findings shed new insights into the role of platform recommendations in helping fund investors make investment decisions and contribute to the business of online mutual fund transactions by investigating the effect of platform recommendations on fund flow and performance.

This paper evaluates the performance of actively managed conventional and Islamic equity funds in a developing economy with a focus to assess the performance-growth puzzle posited by Gruber (1993) (a.k.a Gruber’s puzzle). Under the context of an emerging market of Pakistan, this study explores if actively managed equity fund (AMEF) managers have been able to add value by outperforming the market in terms of stock-selection and market-timing abilities; and the comparative performance analysis of Islamic versus conventional AMEFs is also carried out.

We employ Sharpe and Treynor ratios, Capital asset pricing model, Fama–French three factors model (1993), Carhart four-factor model (1997) and Hendrickson (1981) market timing models on 45 equity funds comprising of 23 conventional and 22 Islamic equity funds operating in Pakistan for a period of 10 years. The overall sample period (2008–2018) is divided into two 5 years sub-periods (i.e. 2009–2013 and 2014–2018) and three 3 years sub-periods (2009–2011, 2012–2014 and 2015–2017) to be viewed in conjunction with the country's macro-economic condition.

We report that the actively managed equity funds (AMEFs) were unable to beat the market index with their stock selection or market timing capabilities. However, AMEFs depicted improved performance in the post-global financial crisis period where both conventional and Islamic AMEFs generated substantial rewards for the given amount of risk. Also, conventional AMEFs outperformed Islamic AMEFs potentially due to their holdings in highly leveraged value and large-cap stocks, while Islamic AMEFS invest more cautiously in small-cap and value firms. Analysis of market timing skills revealed that the funds have not been able to select the undervalued stocks and adopted a defensive strategy in the post-global financial crisis recovery period.

Our findings shed some interesting insights and raise some pertinent questions for research, policy, and practice – specifically for developing countries’ context. The no ‘return-growth’ configuration defies its fit with the ‘Gruber puzzle’ and somewhat presents a case of what we call the ‘Inverse Grubber puzzle’. This novel notion of the ‘Inverse Grubber puzzle’ should inform policy and practice to reflect on their practices, institutional arrangement, regulatory framework and policy design in developing economies characterized by lacklustre performance and growth of AMEFs. For example, the regulatory design may consider focusing on stimulating financial inclusion and deepening by motivating low-cost Index tracker funds (ITFs) – with lower fund management costs, while allocating the avoided cost to flow towards effective marketing campaigns driving greater awareness, financial deepening, and investor base diversification. For future research, financial development researchers may explore the implications and appropriateness of AMEFs versus ITFs in other developing economies.

The work reported in this paper is original and constitutes a valuable asset for ethno-religious-sensitive investors. The research has not been published in any capacity and is not under consideration for publication elsewhere.

Passive investing has established itself as the dominant force in the world of professionally managed assets, surpassing the concept of index funds. Its meteoric rise is fueled by investors’ preference for its dual benefits of strong diversification and low cost. A comprehensive study of the economic model, addressed areas and market structure has not yet been conducted, despite the existence of numerous studies on more specific topics. To address this gap, this paper examines 943 articles on passive investing published between 1998 and 2022 in SCOPUS and Web of Science.

The study utilizes the most pertinent tools for conducting a systematic review by the PRISMA framework. This article is the result of SLR and extensive bibliometric analysis. Contextualized systematic literature review is used to screen and select bibliographic data, which is then subjected to a variety of bibliometric analyses. The study provides a bibliometric overview of works on passive investment research that are indexed in Scopus and Web of Science. Bibliometrix, VoS Viewer and Cite Space are the tools used to conduct content and network analysis, to ascertain the present state of research, as well as its focus and direction.

Our exhaustive analysis yields important findings. One, the previous decade has witnessed a substantial increase in the number of publications and citations; in particular, the inter-disciplinary and international scope of related research has expanded; Second, the top three clusters on “active versus passive funds,” “price discovery and market structures” and “exchange-traded funds (ETFs) as an alternative” account for more than fifty percent of the domain’s knowledge; Third, “Leveraged ETFs (LETFs)” and “environmental, social and governance (ESG)” are the two emerging themes in the passive investing research. Fourth, despite its many benefits, passive investing is not suitable for everyone. To get the most out of what passive investing has to offer, investors, intermediaries and regulators must all exercise sufficient caution. Our study makes a substantial contribution to the field by conducting a comprehensive bibliometric analysis of the existing literature, highlighting key findings and implications, as well as future research directions.

While the study contributes significantly to the field of knowledge, it has several limitations that must be considered when interpreting its findings and implications. With our emphasis on academic journals, the study analyzed only peer-reviewed journal articles, excluding conference papers, reports and technical articles. While we are confident that our approach resulted in a comprehensive and representative database, our reliance on Elsevier Scopus and Web of Science may have resulted in us overlooking relevant work accessible only through other databases. Additionally, specific bibliometric properties may not be time-stable, and certain common distribution patterns of the passive investing literature may still be developing.

With this study, it has been possible to observe and chart the high growth trajectory of passive investing research globally, especially post-US subprime crisis. Despite the widespread adoption of passive investing as an investment strategy, it is not a one-size-fits-all proposition. Market conditions change constantly, and it frequently requires an informed eye to determine when and how much to shift away from active investments and toward passive ones. Currency ETFs enable investors to implement a carry trade strategy in their portfolios; however, as a word of caution, currency stability and liquidity can play a significant role in international ETFs. Similarly, LETFs may be better suited for dynamic strategies and offer less value to a long-term investor. Lastly, the importance of investor education cannot be underestimated in the name of the highly diversified portfolio when using passive alternatives, for which necessary efforts are required by regulators and investors alike.

The inexorable trend to passive investing creates numerous issues for fund management, including fee and revenue pressure, which forces traditional managers to seek new revenue streams, such as illiquid and private assets, which also implies increased portfolio risk. Additionally, the increased transparency and efficiency associated with the ETF market indicates that managers must rethink the entire value chain, beginning with technology and the way investments interact. Passive investments have triggered changes in market structure that are still not fully understood or factored in. Active management and a range of valuation opinions on whether a price is “too low” or “too high” provide much-needed depth to a market as it attempts to strike a delicate balance between demand and supply forces, ensuring liquidity at all price points.

I hereby certify that I am the sole author of this paper and that no part of this manuscript has been published or submitted for publication.

This study aims to investigate the possibility of practicing cross-subsidisation of underwriting surplus among different takaful operators. It responds to the recent discussion paper published by Bank Negara Malaysia (BNM) on broader application of tàawun (mutual assistance), which seeks insights into cross-tàawun of underwriting surplus within takaful industry.

A qualitative, semi-structured interview is used to gather primary data, featuring 13 one-to-one interviews with selected Sharìah and operational experts in takaful. Open-ended questions are drafted according to BNM’s discussion paper to guide the interview. A content analysis method is used to delve into the topic based on scholarly papers, books and regulatory guidelines. A thematic analysis is applied to explore the qualitative data.

This study establishes the feasibility of cross-subsidisation of underwriting surplus in takaful. Given that participants are the rightful owners of the underwriting surplus, cross-tàawun is deemed permissible with participants’ consent. With the view that underwriting surplus belongs to the fund due to outright transfer of contributions by participants, the regulators have discretion to permit cross-tàawun. The authorities can make any decision if it serves the public interest. Furthermore, the study provides Sharìah and regulatory requirements to govern the practice of cross-tàawun in takaful. Respondents of the study advocate for policy reviews and regulatory adjustments to facilitate cross-subsidisation of takaful surplus.

This study significantly contributes to the existing body of knowledge in Islamic insurance studies. It offers valuable insights for the regulators to formulate the required policies and guides takaful operators to develop products accordingly. Moreover, the study supports Sharìah scholars in making informed decisions about cross-tàawun practices.

This study fills a critical gap in the existing literature by being the first to examine cross-subsidisation of underwriting surplus in takaful. The proposed cross-subsidisation of underwriting surplus will enhance sustainability of takaful funds and contribute to stability of takaful industry. As a foundation, this study encourages future research to explore other relevant aspects of cross-subsidisation of underwriting surplus in takaful operation.

We model the relation between excess returns, fund size and industry size for active equity funds.

We study and contrast four markets – global equities, emerging markets, Australia core and Australia small caps – and use the results to investigate the extent to which funds deviate from estimated capacity.

We uncover a significantly negative relation between returns and both fund size and industry size across all markets. The estimated percentage of funds operating above versus below capacity varies both across markets and over time, as does the role played by fund size versus industry size. We find a greater prevalence of funds operating significantly below than above capacity, in contrast to findings for US equity mutual funds. Significant deviations from estimated capacity persist for a median of between two and six quarters.

Our main contribution is to show that the dynamics governing deviations from capacity for active equity funds vary across markets.

Inspired by the groundbreaking novel European regulations on financial investors’ profiling (MiFID II regulation and the ESMA 2022 Guidelines), this paper aims to establish which distinctive socio-demographic traits distinguish investors who declare a generalized interest in all three environmental (E), social (S), and governance (G) pillars and investors who express interest in just one individual pillar or a combination of two pillars.

Based on a unique dataset of 190 real-world retail investors, this paper aims to create a profile of three types of investor: those whose interest lies in just the environmental pillar, those interested in a combination of the environmental and social pillars, and those interested in all three E, S, and G pillars jointly. Moreover, we try to ascertain whether it is possible to observe statistically significant differences between the different types of investors.

The results obtained indicate that it is possible to profile investors who are environmentally-oriented and investors who are ESG-oriented. Notably, levels of financial literacy do not influence investor ESG attitudes.

The results obtained may have multifaceted implications for financial advisors, the banking and financial institution industry, and marketing strategists, as well as for further research.

The originality of this paper derives from the responses used in the analysis, which were collected from a sample of real-world retail investors who completed a mandatory MiFID-questionnaire, validated by the Italian Securities and Markets Supervisory Authority. Our paper thus represents a bridge between a theoretical approach and real-world practice.

The purpose of this study is to evaluate whether the classification of the equity mutual fund depends on the performance measure used.

The sample for this study includes stock mutual funds for the USA, Europe and emerging market economies covering the period 2010 to 2020. Using more than 20 performance measures the results are compared using the Sharpe ratio as the reference.

The results show that performance measures based on absolute reward–risk ratios like Sortino, Treynor, etc. have similar rankings, because in general the numerator (mean excess return) is the same. However, when the authors employ other types of performance measures, results may be significantly different, especially in the case of metrics for “incremental returns”, i.e. alphas. Focussing on markets, their results show that choosing performance measures is more relevant for emerging markets.

The sample is only limited to the USA, Europe and the emerging market, and there are other performance metrics in the literature which have not been covered in this work.

The ordering of equity mutual funds depends on the measure used, specially if investors employ factor models to measure excess returns (alphas). Hence, policy formulation on disclosure of mutual fund performance should encourage the use of several metrics from different families. Investors must be aware of the different rankings made and the most appropriate metrics based on their preferences.

This paper focusses specifically on the effect that performance metrics have on relative fund performance. Previous studies have ignored alpha metrics to rank funds, which are commonly employed by investors. The authors’ study performs an analysis for three different markets considering the two main developed ones (the American and European equity markets), as well as the emerging one, largely ignored until now.

This paper examines the hypothesis of local herding (i.e. own-area effects) by individual investors on a particular stock-month. Using a unique dataset on online and offline individual investors’ trading records in Korea, we analyze buying and selling transactions involving 10,000 accounts from February 1999 to December 2005. We find that both online and offline investors in the same area tend to exhibit stronger local herding compared to investors’ trades who are geographically remote. Interestingly, online investors not only present stronger own-area effects but also exhibit more pronounced other-area effects compared with offline investors. Furthermore, our analysis indicates that gender and religious affiliation are important in investment behavior, with male and non-religious investors displaying a greater stock market participation in contrast to investors who are female and Protestant.

Stirred by scant regard for market phases in portfolio performance assessments, the current paper investigates the active versus passive investment strategies under the bull and bear market conditions in emerging markets focusing on South Africa as a case study.

Methodologically, the measures of Jensen's alpha and Treynor index are applied to the monthly returns of 20 funds from January 2010 to June 2022.

The results are enlightening; though they contradict developed market evidence, they are consistent with emerging market trends. The findings show that actively managed funds outperform the market benchmark and passive investing style under bear and normal market conditions. Passive investment strategy outperforms both market benchmark and actively investing style under bull market conditions.

In the face of improved market efficiency, increased liquidity and recent technological impact, the findings of this study have practical application. The study outcomes should inform and update global investors, especially asset managers interested in emerging markets; however, the limitations of the study should also be considered.

While limited studies consider market conditions when comparing and contrasting the performance of passive versus active investing, such consideration is lacking in emerging markets. The current study corrects this literature imbalance.