The contribution of market movements, asset allocation and active management to Islamic equity funds' performance

Jonathan Peillex (), Elias Erragragui (), Mohammad Bitar and Mohammed Benlemlih
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Jonathan Peillex: CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne
Elias Erragragui: Kedge Business School [Talence]
Mohammad Bitar: UON - University of Nottingham, UK
Mohammed Benlemlih: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School

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Abstract: Where the performance of Islamic equity funds (IEFs) comes from? Is it from market movements, asset allocation policy or from active portfolio management? Our study is the first to tackle this question in the Islamic funds context. We use a database covering 281 IEFs for the period 2007-2016, and we test the role of each factor in explaining their returns. We find that market movements dominate the others components explaining nearly 50% of the monthly return variability and that, taking together, asset allocation policy and active management explain approximately the second half of IEFs returns. We argue that the IEFs underperformance observed by the existing literature could come from an inefficient and too important active portfolio management. \textcopyright 2018 Board of Trustees of the University of Illinois

Date: 2019
Note: View the original document on HAL open archive server: https://u-picardie.hal.science/hal-03688864v1
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Citations: View citations in EconPapers (3)

Published in Quarterly Review of Economics and Finance, 2019, 74, pp.32. ⟨10.1016/j.qref.2018.03.013⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03688864

DOI: 10.1016/j.qref.2018.03.013

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