Islamic mutual funds' financial performance and international investment style: evidence from 20 countries

Hoepner, A., Rammal, H. and Rezec, M. (2011) Islamic mutual funds' financial performance and international investment style: evidence from 20 countries. European Journal of Finance, 17 (9/10). pp. 829-850. ISSN 1466-4364 doi: 10.1080/1351847X.2010.538521

Abstract/Summary

We pursue the first large-scale investigation of a strongly growing mutual fund type: Islamic funds. Based on an unexplored, survivorship bias-adjusted data set, we analyse the financial performance and investment style of 265 Islamic equity funds from 20 countries. As Islamic funds often have diverse investment regions, we develop a (conditional) three-level Carhart model to simultaneously control for exposure to different national, regional and global equity markets and investment styles. Consistent with recent evidence for conventional funds, we find Islamic funds to display superior learning in more developed Islamic financial markets. While Islamic funds from these markets are competitive to international equity benchmarks, funds from especially Western nations with less Islamic assets tend to significantly underperform. Islamic funds’ investment style is somewhat tilted towards growth stocks. Funds from predominantly Muslim economies also show a clear small cap preference. These results are consistent over time and robust to time varying market exposures and capital market restrictions.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/34890
Item Type	Article
Refereed	Yes
Divisions	No Reading authors. Back catalogue items Henley Business School > Finance and Accounting
Publisher	Taylor and Francis
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