Abstract
Mutual Funds enable small investors to enjoy the benefits of the capital market instruments with small amount using the expertise of professional managers. This study examines the risk adjusted performance, timing and selection abilities of conventional and Islamic mutual funds in the context of Pakistan. The emergence of Islamic portfolio in the recent years has put mutual fund investors in puzzle, whether to opt for Islamic or conventional funds. The study analyzes 90 (ninety) open ended funds data, which is comprised of 45 each from Islamic and conventional funds, selected randomly over the period of 2011-2019, from the existing population of open-ended mutual funds. We employ asset pricing models i.e. CAPM (1966), and Fama French three factors (1993) model, to measure the risk adjusted performance, and Treynor and Mazuy (1966) model for predicting their selectivity and timing abilities. The results demonstrate that Conventional funds perform better than Islamic funds in term of risk adjusted performance, and conventional funds predict better market timing and selection abilities than its Islamic portfolio. The study has certain implications for the managers of the assets management companies in selecting their best portfolios, making timely investment and will, also be useful for the investors in knowing funds, which perform better.Keywords: Risk adjusted performance, Market timing and Selection abilities, Open ended mutual fund, PakistanJEL Classifications: G22, G12DOI: https://doi.org/10.32479/ijefi.10090
Highlights
Investing in mutual fund is a common phenomenon, but the recent emergence of Islamic portfolio in Islamic world has put many mutual fund investors in test
This study attempts to examine both conventional and Islamic funds, to understand their risk adjusted performance, timing abilities and selectivity skills, in order to provide a clear picture about risk and return associated with these both portfolio, to investors in this emerging area
Et al.: Conventional Mutual Funds Out Perform Islamic Mutual Funds in the Context of Pakistan: A Myth or Reality choice in the financial market for small investors characterized by diversified investment attributes
Summary
Investing in mutual fund is a common phenomenon, but the recent emergence of Islamic portfolio in Islamic world has put many mutual fund investors in test. Et al.: Conventional Mutual Funds Out Perform Islamic Mutual Funds in the Context of Pakistan: A Myth or Reality choice in the financial market for small investors characterized by diversified investment attributes. The values of assets invested in mutual funds have been increased significantly in the last decade as compared to the direct ownership of common stock This tremendous growth of MF signifies the interest of investors in the safer investment choice of mutual fund (Huhmann and Bhattacharyya, 2005; Rehman and Baloch, 2016). The world has witnessed an increasing trend in the mutual fund industry, in developing countries This particular investment choice is highly preferred by all kinds of investors. Forth section showing the empirical results, while the last and fifth section provides the details about the findings and conclusion
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