Comparative Analysis of Islamic and Conventional Mutual Funds’ Performance during Financial Crisis and Non-Crisis Periods in Pakistan

18 Pages Posted: 5 Jan 2019 Last revised: 23 May 2022

See all articles by Imran Ahmed

Imran Ahmed

University of Karachi, Business School

Danish Ahmed Siddiqui

University of Karachi - Karachi University Business School

Date Written: December 22, 2018

Abstract

This study aims to analyze and investigates the differences in performance of Islamic and conventional mutual funds in three periods, namely the period during the financial crisis period, dated 2008 to 2009, after crises period 2010 to 2017, and the whole period, dated from 2007 to 2017. More specifically the study aims to investigate whether the Shariah compliant Equity, Income and assets allocation mutual funds performed better in terms of risk adjusted basis as compared to the conventional Equity, Income and asset allocation mutual funds. The risk return behaviors were examined by employing performance measures such as Sharpe, Treynor, and Jensen Alpha. Moreover, their performance in coping of systematic risk is also analyzed by regressing macroeconomic variables on returns. Study concluded that Conventional Income mutual funds perform better in all three periods including (crises and non-crises) compare to its counterpart Islamic income mutual funds in both risks adjusted basis and simple arithmetic mean basis, however their difference is not statistically significant. Study also found that Islamic equity mutual funds perform better in crises period as compare to its conventional equity mutual funds in risk adjusted basis In crises period both funds gave negative return, but Islamic equity mutual funds declined less than conventional mutual funds which shows that Islamic mutual funds provide better hedging in crises period., however there were no significant difference among the two in the other two periods. Similarly, Assets Allocation funds also have no significant difference among themselves, however Islamic asset allocation mutual funds outperform conventional asset allocation mutual funds in all three periods, especially in crises period where Islamic funds showing positive returns as compared to conventional fund that were suffering in loss of about 14%. Overall the whole period performance of Islamic mutual funds is slightly better but not statically difference.

Keywords: Mutual funds, financial crisis, risk, equity, income, asset return, net asset value, t-test.

Suggested Citation

Ahmed, Imran and Siddiqui, Danish Ahmed, Comparative Analysis of Islamic and Conventional Mutual Funds’ Performance during Financial Crisis and Non-Crisis Periods in Pakistan (December 22, 2018). Available at SSRN: https://ssrn.com/abstract=3305600 or http://dx.doi.org/10.2139/ssrn.3305600

Imran Ahmed

University of Karachi, Business School ( email )

University Road
Karachi, 75270
Pakistan

Danish Ahmed Siddiqui (Contact Author)

University of Karachi - Karachi University Business School ( email )

University Road
Karachi, Sindh 75270
Pakistan
3333485884 (Phone)

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