Measuring the selectivity and market timing performance of Islamic mutual funds in the KSA

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.

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MANAGERIAL ABILITIES AND FACTOR INVESTMENT STYLE PERFORMANCES OF MALAYSIAN MUTUAL FUND MANAGERS

Journal of Nusantara Studies (JONUS) ◽

10.24200/jonus.vol6iss1pp118-135 ◽

2021 ◽

Vol 6 (1) ◽

pp. 118-135

Author(s):

Pick-Soon Ling ◽

Ruzita Abdul-Rahim

Keyword(s):

Mutual Funds ◽

Portfolio Management ◽

Mutual Fund ◽

Market Timing ◽

Stock Selection ◽

Investment Style ◽

Fund Managers ◽

Equity Mutual Funds ◽

Timing Ability ◽

Stock Picking

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

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Selectivity and Market Timing Ability of Fund Managers: Comparative Analysis of Islamic and Conventional HSBC Saudi Mutual Funds

International Journal of Financial Studies ◽

10.3390/ijfs7030048 ◽

2019 ◽

Vol 7 (3) ◽

pp. 48 ◽

Cited By ~ 1

Author(s):

Zouaoui

Keyword(s):

Comparative Analysis ◽

Mutual Funds ◽

Market Timing ◽

Performance Persistence ◽

Stock Selection ◽

Fund Managers ◽

Market Index ◽

Good Market ◽

Timing Ability ◽

Better Than

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.

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An Empirical Investigation of the Performance of Fund Managers in Pakistan

iRASD Journal of Management ◽

10.52131/jom.2021.0301.0026 ◽

2021 ◽

Vol 3 (1) ◽

pp. 56-68

Author(s):

Sanaullah Sanaullah ◽

Amna Noor ◽

Salleh Khan ◽

Muhammad Shahbaz Khan

Keyword(s):

Mutual Funds ◽

Mutual Fund ◽

Market Timing ◽

Performance Study ◽

Stock Selection ◽

Mutual Fund Managers ◽

Fund Managers ◽

Timing Ability ◽

Equity Funds ◽

Manager Performance

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.

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

THE LAHORE JOURNAL OF ECONOMICS ◽

10.35536/lje.2015.v20.i2.a3 ◽

2015 ◽

Vol 20 (2) ◽

pp. 53-75 ◽

Cited By ~ 1

Author(s):

Syed Kalim Hyder Bukhari ◽

Mohammed Azam

Keyword(s):

Mutual Funds ◽

Selection Process ◽

Market Timing ◽

Socially Responsible ◽

Performance Review ◽

Fund Managers ◽

Timing Ability ◽

Equity Funds ◽

Social Environmental ◽

Socially Responsible Mutual Funds

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.

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Performance of Indian Mutual Fund Schemes

International Journal of Recent Technology and Engineering - 2 ◽

10.35940/ijrte.b1112.0782s619 ◽

2019 ◽

Vol 8 (2S6) ◽

pp. 590-592

Keyword(s):

Decision Making ◽

Mutual Funds ◽

Mutual Fund ◽

Market Timing ◽

Risk Diversification ◽

Fund Managers ◽

Timing Ability ◽

Direct Growth ◽

Tax Benefits

Risk, diversification, features of investment avenues, and tax benefit are the factors considered by the investors in their decision making. The convenience of investing in small proportions and tax benefits attracts the investors towards mutual fund investments. The studies prove that market timing ability of fund managers drives the mutual fund scheme performance. This assessment of the above factors would help to the investors in their choice of mutual funds. 36 Indian Mutual Funds Schemes were assessed using the Sharpe, Treynor, Jensen’s measure from January to June 2019. L&T Liquid Fund –Direct (Growth), L&T Low Duration Fund-Growth and Edelweiss Large Cap Fund - Direct (Growth) performed well.

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Market Timing and Stock Selection Ability of Mutual Funds in India: An Empirical Investigation

Vikalpa The Journal for Decision Makers ◽

10.1177/0256090920070204 ◽

2007 ◽

Vol 32 (2) ◽

pp. 39-52 ◽

Cited By ~ 10

Author(s):

Soumya Guha Deb ◽

Ashok Banerjee ◽

B B Chakrabarti

Keyword(s):

Mutual Funds ◽

Mutual Fund ◽

Emerging Market ◽

Market Timing ◽

Public Information ◽

Superior Performance ◽

Stock Selection ◽

Mutual Fund Managers ◽

Fund Managers ◽

Timing Ability

Evaluation of performance of mutual funds and identification of successful fund managers are of great interest to both investors and academicians. Two possible methods that are presumed to be used by fund managers for generating superior performance are identified as: Market timing: Market timing skills imply assessing correctly the direction of the market, whether bull or bear, and positioning their portfolios accordingly. Stock selection: Stock selection skills involve micro forecasting, which generally forecasts price movements of individual stocks relative to stocks and identification of individual stocks that are under-or over-valued relative to equities in general. The two pioneering works in this field is by Treynor Mazuy( 1966) and Henriksson Merton ( 1981). They developed two different models for testing the market timing and stock selection abilities of the fund managers but found little evidence of timing by the fund managers in their samples. Most of the other works mentioned in the paper have used these two models (which we name as traditional/unconditional models) or slight variations of the same for testing market timing and stock selection abilities of the fund managers. Person and Scadt (1996) modified the classical performance measures (of timing and stock selection ability) to take account of well-known information variables like interest rate, market dividend yield, etc. They termed it as ‘conditional approach’ of measuring mutual fund performance and claimed that conditioning on public information controls for biases in traditional market timing and stock selection models. Traditional models have taken the view that ‘any information’ correlated with the future market returns is superior information; in other words, they are unconditional models. Person and Scadt's approach used basically the same simplifying assumptions as the traditional models but they assumed, in addition, semi-strong form of market efficiency. The idea was to distinguish between market timing based on public information from market timing information that is superior to the lagged publicly available information variables. Although the academic literature on stock selection and market timing ability of mutual fund managers is rich and spans several decades, not many studies exist on this issue using emerging market data. This paper attempts to find the stock selection and market timing abilities of the Indian mutual fund managers using unconditional as well as conditional approaches. With a sample of 96 Indian mutual fund schemes, a lack of market timing ability and presence of stock selection ability were observed among the Indian funds managers in both unconditional as well as conditional approaches. A pooled regression was carried out for various categories of funds as well as for the entire sample, which also showed a lack of market timing abilities and presence of stock selection abilities.

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