PERFORMANCE OF SHARIAH VERSUS CONVENTIONAL FUNDS: LESSONS FROM EMERGING MARKETS

  • Ruzita Abdul-Rahim
  • Aisyah Abdul-Rahman
  • Pick-Soon Ling

Abstract

This study compares the performance of Shariah and conventional mutual funds in emerging markets. The performance of 833 Shariah and conventional funds in 6 emerging markets from 2000 to 2015 was analyzed. We analyzed the Sharpe index, Treynor index, and Jensen’s alpha to compare the performance of Shariah and conventional funds. Jensen's alpha results conform to those of Sharpe’s in indicating that Shariah funds slightly outperform their conventional counterparts particularly in the case of Malaysia, Pakistan, and South Africa. Conventional funds perform exceptionally well in Egypt. Further investigation using the Henriksson–Merton model shows that fund managers’ performance relies nearly completely on their stock selection skills because they have either inferior or ineffective ability in timing the market. This study is the first cross-country attempt to compare the performance of Shariah and conventional funds in emerging markets in terms of risk-adjusted returns, security selectivity, and market timing capability.

 

Keywords: Emerging markets, Jensen’s alpha, mutual funds, risk-adjusted performances, Shariah mutual funds

 

Cite as:   Abdul-Rahim, R. Abdul-Rahman, A., & Ling, P-S. (2019). Performance of Shariah versus conventional funds: Lessons from emerging markets.  Journal of Nusantara Studies, 4(2), 193-218. http://dx.doi.org/10.24200/jonus.vol4iss2pp193-218

Author Biographies

Ruzita Abdul-Rahim

Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia

Aisyah Abdul-Rahman

Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia

Pick-Soon Ling

Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia

Published
2019-12-18
How to Cite
Abdul-Rahim, R., Abdul-Rahman, A., & Ling, P.-S. (2019). PERFORMANCE OF SHARIAH VERSUS CONVENTIONAL FUNDS: LESSONS FROM EMERGING MARKETS . Journal of Nusantara Studies (JONUS), 4(2), 193-218. https://doi.org/10.24200/jonus.vol4iss2pp193-218