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Heads we win, tails you lose: Is there equity in Islamic equity funds?

Nazrol K.M. Kamil, Syed Othman Alhabshi (), Obiyathulla Bacha and Abul Masih ()

Pacific-Basin Finance Journal, 2014, vol. 28, issue C, 7-28

Abstract: We made the first estimate of the proportion of fund alpha statistically attributable to luck rather than skill for a sample of Malaysian Islamic equity funds. Broadly, the funds do not outperform market benchmarks. In the limited instances where performance is superior, based on a contemporary methodology, as much as 47% of the observed positive fund alpha is statistically attributable to luck. Thus, at 5% significance level, we find only 1.95% of our funds to be genuinely skilled. Our findings raise questions regarding the equitability of these funds levying fixed fees, making a case for potential innovation in fund remuneration structure.

Keywords: Islamic equity funds; Luck versus skill; Performance measurement (search for similar items in EconPapers)
JEL-codes: C21 G11 G12 Z12 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.pacfin.2013.09.004

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