Comparative analysis ofShari’ah-compliant portfolios: evidence from Pakistan

Salman Ahmed Shaikh (), Mohd Adib Ismail, Abdul Ghafar Ismail, Shahida Shahimi and Muhammad Hakimi Mohd. Shafiai

Journal of Islamic Accounting and Business Research, 2019, vol. 10, issue 3, 466-487

Abstract: Purpose - This study aims to comparatively analyze the performance of Islamic and conventional income and equity funds using various performance evaluation methods. Design/methodology/approach - The authors comparatively analyze the performance of mutual funds using measures, such as tracking error, Sharpe ratio (1966), Treynor ratio (1965), M-square measure byModigliani and Modigliani (1997) and information ratio. The authors also use market timing and selection measures, such as Treynor and Mazuy model (1966),Henriksson and Merton (1981) model and Fama’s decomposition approach (1973). Findings - The authors find that Islamic equity funds are as much competitive as conventional equity funds. All Islamic equity funds have positive Sharpe ratio, Treynor ratio and net selectivity measure. Islamic equity funds are slightly less risky in general. Islamic equity and income funds generally have positive Jensen's Alpha and a positive market timing ability. However, the authors find that Islamic income funds generally underperform the market due to lessShari’ah-compliant investment class assets in the market. Practical implications - It will help the industry players to assess their strategic positioning with regard to the commercial competitiveness of Islamic investments. Originality/value - The authors take considerably large sample of 60 funds in Pakistan as compared to previous studies and also cover recent period (2006-16). For income funds, the authors construct an original benchmark index based on price and dividend data and use that in performance assessment.

Keywords: Islamic funds; Portfolio management; Ethical investments; Halal investments; Pakistan mutual funds; Portfolio evaluation; G11; G15; G23 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-10-2016-0121

DOI: 10.1108/JIABR-10-2016-0121

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