scholarly journals A Comparative Returns Performance Review of Islamic Equity Funds with Socially Responsible Equity Funds and the Broader Market Indices

2015 ◽  
Vol 20 (2) ◽  
pp. 53-75 ◽  
Author(s):  
Syed Kalim Hyder Bukhari ◽  
Mohammed Azam

Islamic mutual funds and socially responsible mutual funds are two similar asset classes that incorporate negative screens in their portfolio selection process to filter out stocks that fail to meet certain ethical, social, environmental, and/or religious standards. This study uses a single-factor capital asset pricing model and an adjusted sample consisting of 224 Islamic funds and 573 socially responsible funds to examine their excess risk-adjusted returns, market volatility, and systematic risk. It also gauges the market-timing abilities of the fund managers concerned in relation to both Islamic/socially responsible and conventional market indices. While there are some differences in the risk factors of Islamic funds and socially responsible funds, both are associated with lower risks and have the same market-timing ability.

2021 ◽  
Vol 3 (1) ◽  
pp. 56-68
Author(s):  
Sanaullah Sanaullah ◽  
Amna Noor ◽  
Salleh Khan ◽  
Muhammad Shahbaz Khan

This study aims to determine the stock selection ability and market timing ability of mutual fund managers, focusing on conventional funds and Islamic funds in Pakistan.  Although there has been significant growth in the number and assets of mutual funds in recent years, few studies measure the performance of mutual funds managers. The scarcity of existing literature motivates this study. In this study, two models are used to measure the stock selection and market timing on a sample of conventional mutual funds and Islamic mutual funds over 2010 and 2019 using annual returns. Overall, the results indicate that the performance study of conventional mutual funds and Islamic mutual funds indicates that manager performance is not superior in all three portfolios, i.e., conventional funds, Islamic funds, and overall funds in over sample period. This also indicates that both Conventional and Islamic fund managers do not outperform the market (KSE 100 index). Thus, there is a lack of market timing ability. Using Tranoy and mazuy and Jansen models found a lack of stock selection and market timing ability of mutual fund managers in Pakistani mutual funds. In this study, I have applied only two models to examine both the timing and selection ability of conventional and Islamic Pakistani equity funds. For future possibilities, the study suggests adopting several methods and approaches like the TMFF3 model and HM-FF3 model, making the study more comprehensive and accurate than this research.


2021 ◽  
Vol 6 (1) ◽  
pp. 118-135
Author(s):  
Pick-Soon Ling ◽  
Ruzita Abdul-Rahim

Background and Purpose: Studies focusing on mutual fund managerial abilities and investment style strategies are still scarce in the literature. Thus, this study aims to provide new evidence and insights into the managerial abilities and investment style performances of Malaysian fund managers.   Methodology: A total of 444 Malaysian equity mutual funds (EMFs) were evaluated using Carhart’s model incorporated with Treynor-Mazuy (T-M) and Henriksson-Merton (H-M) market timing models for the study period, from January 1995 to December 2017.   Findings: Fund managers displayed superior stock selection skills with 32 percent and 43 percent of funds for T-M and H-M respectively, with perverse market timing ability which accounted for 39 percent and 42 percent of funds for T-M and H-M respectively. Perverse timing ability had reduced the superior stock-picking skills of fund managers. This suggests that the EMFs performance could further improve if respective fund managers perform better in market timing ability. The finding also indicates that size effect (SMB) and value effect (HML) play significant roles in investment style strategies, while results of momentum factor (WML) propose that Malaysian fund managers have followed the contrarian strategy.   Contributions: This study contributes in several ways especially in the literature of portfolio management as the evidence is obtained from the largest mutual funds sample size and the longest study period. Moreover, this study also used the highest frequency data to study the effects of market timing which were overlooked in previous studies.   Keywords: Adjusted carhart, Malaysian market, market timing, mutual fund, stock selection.   Cite as: Ling, P-S., & Abdul-Rahim, R. (2021). Managerial abilities and factor investment style performances of Malaysian mutual funds.  Journal of Nusantara Studies, 6(1), 118-135. http://dx.doi.org/10.24200/jonus.vol6iss1pp118-135


2020 ◽  
Vol 11 (2) ◽  
pp. 77
Author(s):  
Rina Rachmawati ◽  
Sugeng Wahyudi ◽  
Irene Rini Demi Pangestuti ◽  
Najmudin .

This study examines the effect of investment fund managers' characteristics in the form of tenure, and mutual fund characteristics with proxy turnover portfolios, market timing and stock selectivity on the performance of stock mutual funds. The research sample is 27 stock mutual funds in Indonesia that were active from 2013 to 2017. On the analysis of the relationships between the characteristics of investment managers and mutual funds characteristics on the performance of stock mutual funds, a series of OLS regressions were run. The panel data regression was included based on using the Eviews. All of the above were aimed at achieving portfolio optimization and realizing the maximization of the interests for fund management companies and investors. The main findings are as follows. Tenure does not affect the performance of stock mutual funds during the years 2013 to 2017, but if divided into 2 quadrants of tenure, namely tenure over 19 years and tenure under 19 years of work, the result is that tenure over 19 years has a positive effect on the performance of stock mutual funds, but tenure brought 19 years has no effect on the performance of equity funds, whereas mutual funds characteristics, which are proxied by portfolio turnover, market timing and stock selectivity, have a significant positive effect on the performance of equity funds in Indonesia. The primary limitation in the scope is the sample, because stock mutual funds that publish consistently Financial statements between 2013 and 2017 are few in number. These findings have important implications for fund management companies as input material that the investment strategy of the investment management team affects the performance of equity funds compared to the characteristics of investment managers with proxies for years of service. This paper proposes a new perspective to evaluate the relationship between the fund manager and mutual funds characteristicsanddivide 2 groups of working years, and calculate them with non-linear models.


Accounting ◽  
2021 ◽  
pp. 1067-1072
Author(s):  
Habib Hasnaoui ◽  
Ibrahim Fatnassi

This paper examines the selectivity and market timing abilities of Islamic fund managers in the Kingdom of Saudi Arabia (KSA), since the empirical research has yet to explore the profitability and investment risk factors involved. We use a uniquely large set of data for 134 Islamic funds for a period from June 2002 to December 2019, and this was free from any survival bias. We found that Islamic fund managers in the KSA demonstrated good selectivity skills but no market timing ability. We also found that Islamic fund managers in the KSA tend to select companies with aggressive investment patterns despite their low profitability.


2017 ◽  
Vol 11 (2) ◽  
pp. 167-187 ◽  
Author(s):  
Zia-ur-Rehman Rao ◽  
Muhammad Zubair Tauni ◽  
Amjad Iqbal ◽  
Muhammad Umar

Purpose The purpose of this paper is to find whether Chinese equity funds outperform the market and do Chinese fund managers possess positive market timing ability. This study also aims to investigate whether well-performing (worst) funds of last year continue to perform well (worst) in the following year. Design/methodology/approach Capital Asset Pricing Model and Carhart four-factor model are used for performance analysis, whereas for analyzing market timing ability, the Treynor and Mazuy (1966) and Henriksson and Merton (1981) models are applied. To investigate persistence in the performance of Chinese equity funds, all equity funds are divided, on the basis of performance in the past 12 months, into three equally weighted groups (high, middle and low) and then observed for next 12 months. After that, groups are again rebalanced according to their performance. This study uses a panel regression model for analysis. Findings Chinese equity funds are successful in providing higher than market returns, and fund managers possess positive market timing ability. The authors find that Chinese equity funds do not show persistence in performance as witnessed in developed markets. Well-performing funds (worst funds) of last year do not continue to provide higher (lower) return in the following year. Moreover, the authors detect positive relationship of fund size, age and expense ratio with the fund’s performance. Overall results suggest that emerging market equity funds show better performance than that of developed markets. Practical implications Investors are better off if they invest in equity funds instead of index funds, as results illustrate that equity funds outperformed the market. Further, the strategy of buying well-performing funds of last year and selling poorly performing funds of last year does not look very attractive in China. This study helps investors to understand the Chinese managed funds industry, and such an understanding is also helpful for fund managers and asset management companies who use performance information in marketing strategies. Originality/value This is the first study to investigate the performance persistence in Chinese equity funds and also contributes to the literature about the performance and market timing ability of equity funds. The study takes the sample of 520 equity funds for the period from 2004 to 2014, which includes a period of financial crisis of 2008.


2019 ◽  
Vol 7 (3) ◽  
pp. 48 ◽  
Author(s):  
Zouaoui

This paper empirically compares the market timing, the stock selection and the performance persistence of Islamic and conventional HSBC Saudi mutual funds by using monthly returns from April 2011 to December 2018. The data was grouped into five portfolios based on geographical investment basis (locally, Arab, internationally) and Sharia compliance (Islamic and conventional). The empirical results indicate that Islamic funds underperformed conventional funds internationally but not locally. Findings suggest that the market selectivity skills of managers in the Islamic funds are better than the conventional funds. In addition, only the managers of Saudi conventional funds investing internationally have a good market timing skills, thus, they are able to beat the market index by predicting its movements and buying and selling accordingly. Furthermore, this study gives a brief idea about the performance persistence of HSBC Saudi funds. The results confirm existence of the persistence performance when the funds do not apply Sharia law and when they are instead focused internationally.


2015 ◽  
Vol 11 (2) ◽  
pp. 258-269 ◽  
Author(s):  
Praveen K. Das ◽  
S. P. Uma Rao

Purpose – The purpose of this paper is to examine the market timing and stock selection abilities of socially responsible (SR) mutual funds. Some high-profile SR fund managers try to embrace market timing and security selection plans to add value to the performance. Market timing relies on forecasting the equity market and shifting assets into or out of the market in anticipation of market movements. The selectivity measure assesses fund managers ability to select undervalued securities. Furthermore, the authors examine whether fund characteristics play any role in market timing and security selection ability. Design/methodology/approach – The authors use Treynor and Mazuy's’ (1966) and Henriksson and Mertons’ (1981) model to examine the market timing and security selection ability. The study uses a decade of monthly returns to examine the skills of fund managers in the SR industry for the period from July 2002 to June 2012. Findings – The main findings are that the managers – though not very successful – do indulge in stock selection and market timing activities. It was found that 48 funds have positive statistically significant stock selectivity coefficients and only a very small number of five funds with positive statistically significant market timing coefficients. Results suggest that there is a trade-off between the two activities. It was found that aggressive funds, funds with higher growth rate and riskier funds are more likely to engage in market timing rather than stock selection. Practical implications – The implication is that SR managers cannot achieve superior stock selection and market timing ability simultaneously. Risk-averting investors in SR funds expect SR behavior from the managers. This means that managers of SR funds, with very little evidence of market timing ability, may have to refrain from market timing of SR funds. Originality/value – Using a Morningstar dataset comprising almost all SR funds in existence as of June 2012, this is probably the most exhaustive long-term study to date on market timing and stock selection abilities of SR fund managers.


2017 ◽  
Vol 34 (4) ◽  
pp. 597-631
Author(s):  
Nuno Manuel Veloso Neto ◽  
Júlio Fernando Seara Sequeira da Mota Lobão ◽  
Elisabete Simões Vieira

Purpose This study aims to evaluate the performance of the Portuguese fund managers by examining the selectivity and market timing skills of 51 Portuguese mutual funds from June 2002 to March 2012. Design/methodology/approach The authors assess empirically the performance of a sample of funds by applying the unconditional and conditional models of Treynor and Mazuy (1966) and Henriksson and Merton (1981). Findings The results suggest that, overall, the Portuguese mutual funds do not possess selectivity or timing skills. However, regardless of the model used, the domestic equity funds exhibit a statistically significant market timing ability. Furthermore, the domestic and North American equity funds display positive selectivity during bull markets and timing skills during bear markets. Additionally, there is some evidence that older funds are better stock pickers than younger funds. Research limitations/implications To address some of the limitations of this study, the authors suggest for further research correcting the Treynor and Mazuy (1966) model for the convexity cost of replicating Merton’s (1981) option approach. Additionally, for further research, we suggest using a bigger sample, higher frequency data, as such data may lead to higher frequency of timing ability as proposed by Bollen and Busse (2001). To overcome some of the limitations of traditional models, future research may consider using Jiang’s (2003) nonparametric test, as it is not affected by manager’s risk aversion, or Ferson and Khang (2002) conditional performance evaluation using portfolios holdings. Originality/value The authors contribute to the current literature by extending the period of study to 10 years in comparison to previous studies; extending the sample of funds to 51; addressing, for the first time in this context, the importance of public information on funds’ performance, through the comparison of unconditional and conditional models of Treynor and Mazuy’s (1966) and Henriksson and Merton’s (1981); and, for the first time in the Portuguese context, analysing the relationship between funds’ size, age and market cycles and selectivity and market timing skills.


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