Does Faith Matter in Mutual Funds Investing? Evidence from Saudi Arabia

Hesham Merdad, M. Kabir Hassan and Mohsin Khawaja

Emerging Markets Finance and Trade, 2016, vol. 52, issue 4, 938-960

Abstract: This article investigates one of the most vital issues in the Islamic mutual fund literature: Are there any costs associated with investing in Islamic mutual funds? We used a unique sample of 143 Saudi mutual funds and grouped them into portfolios based on their geographical focus, Shariah compliance, and the Saudi market trend (overall, bull, bear, and the crisis period). Findings suggest there is a benefit from adhering to Shariah law in locally-focused Saudi mutual funds. However, there is a cost of this adherence in internationally-focused Saudi mutual funds. Finally, in Arab-focused Saudi mutual funds, there is neither a cost nor a benefit.

Date: 2016
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DOI: 10.1080/1540496X.2015.1025655

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