ISLAMIC VS CONVENTIONAL FUNDS WITHIN THE FAMILY: SELECTIVITY SKILLS AND MARKET TIMING ABILITY

Anas Ahmad Bani Atta () and Ainulashikin Marzuki ()
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Anas Ahmad Bani Atta: Universiti Sains Islam Malaysia (USIM), Malaysia
Ainulashikin Marzuki: Universiti Sains Islam Malaysia (USIM), Malaysia

Journal of Islamic Monetary Economics and Finance, 2020, vol. 6, issue 2, 439-462

Abstract: The aim of this study is to compare the performance of Islamic mutual funds (IMFs) and conventional mutual funds (CMFs) within the same family, and also to examine the performance of fund families in Malaysia over the period 2007 to 2018. The study uses eight measures of performance: raw returns, excess returns, the Sharpe ratio, the Treynor ratio, Jensen’s alpha and Carhart’s four-factor model as selectivity models, in addition to the Treynor and Mazuy (TM) and Hendrickson and Merton (HM) as market timing models. The study contributes by investigating and comparing performance at the family level. The results show that IMFs exhibited certain fund selection ability over CMFs. However, both types of fund displayed poor market timing ability. At the fund family level, the results show that families exhibited good fund selection skills, but at the same time poor market timing ability. The novel findings of the study relate to the difference in performance between Islamic and conventional funds; shrank compared to the results of previous studies. Due to the common advantages offered by the families for both types of funds. The findings are important for investors because the results provide new evidence about fund family performance. Most investors follow the top-down approach, whereby mutual fund investors initially choose fund families before deciding which specific funds to hold. In addition, the results are important for managers to decide which types of funds that should perform well in the future they could include to their own families.

Keywords: Islamic finance; Islamic mutual fund; Fund family; Family performance (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G23 G41 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:idn:jimfjn:v:6:y:2020:i:2i:p:439-462

DOI: 10.21098/jimf.v6i2.1091

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