Large scale analysis of Islamic equity funds using a meta-frontier approach with data envelopment analysis

Rania Makni, Olfa Benouda and Ezzedine Delhoumi

Research in International Business and Finance, 2015, vol. 34, issue C, 324-337

Abstract: The paper aims to analyze the efficiency of Islamic equity funds (IEF) during crisis and growth periods and across six investment regions. To our best knowledge, our study uses for the first time the meta-frontier approach with data envelopment analysis (DEA) to compare the relative efficiency of Islamic equity funds. The paper uses a large scale set of data with a sample of 301 IEF for the period of 1993–2013 which enables us to reach conclusions across different investment regions and across different periods which cannot be made with a small size set of data. The paper provides empirical evidence about the improvement of the efficiency levels between 2002 and 2007. It shows that the average efficiency scores during recession periods are higher than the corresponding scores during growth periods. The paper also reveals that the Asia Pacific and Middle East/Africa investment regions exhibit the best technology for IEF. While North America, Europe, Emerging Markets and funds investing worldwide operate with almost the same scores and remain below the average showing a technology gap from “the best practice” for IEF. For funds investing worldwide and in North America, the meta-technology ratio is steadily increasing since 2009, indicating an improvement in their technologies. Our results suggest that although Islamic funds do not seem to be impacted by the financial crisis, they do need to improve their efficiency since the levels are far below the frontier.

Keywords: Islamic funds; Mutual funds; Crisis periods; Investment regions; Meta-frontier approach; Data envelopment analysis (search for similar items in EconPapers)
JEL-codes: G01 G1 G11 G15 G2 G23 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:34:y:2015:i:c:p:324-337

DOI: 10.1016/j.ribaf.2015.02.014

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