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
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)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:28:y:2014:i:c:p:7-28
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