Mutual fund performance : evidence of stock selection and market timing ability from Islamic mutual funds

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  • Faisal Alkassim

    Research areas

  • PhD, Bangor Business School

Abstract

The main objective of this thesis is to provide a detailed analysis of the performance of mutual funds with particular focus on Islamic funds. Studies that review the performance of Islamic funds are rare although there has been a significant growth in the number and assets in recent years. The average annual growth in the number of Islamic funds amounted to 18% and the average annual growth in total assets of such funds came to 42% between the year 2005 and 2006 according to Failaka International. In this thesis we use four stock selection models and three market timing models to evaluate the performance on a sample of Islamic mutual funds over the period 2000 and 2006 using weekly returns. Overall, the results from the performance study of Islamic mutual funds indicate that there is underperformance in terms of stock selection ability. Thus, there is a lack of market timing ability. In consequence, we test for robustness in market timing results by adopting a conditional market timing model similar to Prather and Middleton (2006) and Cuthbertson, Nitzsche, and O'Sullivan (2006). However, we arrive at negative conditional market timing results. Moreover, we test for evidence of performance persistence for Islamic mutual funds and the results suggest that there is evidence of negative performance persistence.

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Original languageEnglish
Awarding Institution
Supervisors/Advisors
Thesis sponsors
  • Ministry of Higher Education
Award dateJan 2009