Comparative analysis of Shari’ah -compliant portfolios: evidence from Pakistan
Journal of Islamic Accounting and Business Research
ISSN: 1759-0817
Article publication date: 7 May 2019
Issue publication date: 7 May 2019
Abstract
Purpose
This study aims to comparatively analyze the performance of Islamic and conventional income and equity funds using various performance evaluation methods.
Design/methodology/approach
The authors comparatively analyze the performance of mutual funds using measures, such as tracking error, Sharpe ratio (1966), Treynor ratio (1965), M-square measure by Modigliani and Modigliani (1997) and information ratio. The authors also use market timing and selection measures, such as Treynor and Mazuy model (1966), Henriksson and Merton (1981) model and Fama’s decomposition approach (1973).
Findings
The authors find that Islamic equity funds are as much competitive as conventional equity funds. All Islamic equity funds have positive Sharpe ratio, Treynor ratio and net selectivity measure. Islamic equity funds are slightly less risky in general. Islamic equity and income funds generally have positive Jensen's Alpha and a positive market timing ability. However, the authors find that Islamic income funds generally underperform the market due to less Shari’ah-compliant investment class assets in the market.
Practical implications
It will help the industry players to assess their strategic positioning with regard to the commercial competitiveness of Islamic investments.
Originality/value
The authors take considerably large sample of 60 funds in Pakistan as compared to previous studies and also cover recent period (2006-16). For income funds, the authors construct an original benchmark index based on price and dividend data and use that in performance assessment.
Keywords
Citation
Shaikh, S.A., Ismail, M.A., Ismail, A.G., Shahimi, S. and Mohd. Shafiai, M.H. (2019), "Comparative analysis of
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited