Abstract

https://ssrn.com/abstract=1475037
 
 

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Islamic Mutual Funds’ Financial Performance and International Investment Style:
Evidence from 20 Countries


Andreas G. F. Hoepner


University of Reading - ICMA Centre; Stockholm School of Economics - Mistra Financial Systems (MFS)

Hussain Gulzar Rammal


University of Technology Sydney (UTS)

Michael Rezec


Sociovestix Labs - a DFKI spin-off

September 17, 2009

European Journal of Finance, Forthcoming

Abstract:     
We pursue the first large scale investigation of a strongly growing mutual fund type: Islamic funds. Based on an unexplored, survivorship bias adjusted dataset, we analyse the financial performance and investment style of 265 Islamic equity funds from twenty 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.

Number of Pages in PDF File: 37

Keywords: fund manager learning, home bias, Islamic finance, Islamic mutual funds, responsible investment, three level Carhart model

JEL Classification: C22, F21, G01, G10, G11, G32, Z12


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Date posted: October 12, 2009 ; Last revised: December 18, 2010

Suggested Citation

Hoepner, Andreas G. F. and Rammal, Hussain Gulzar and Rezec, Michael, Islamic Mutual Funds’ Financial Performance and International Investment Style: Evidence from 20 Countries (September 17, 2009). European Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1475037

Contact Information

Andreas G. F. Hoepner (Contact Author)
University of Reading - ICMA Centre ( email )
Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
Stockholm School of Economics - Mistra Financial Systems (MFS) ( email )
MISUM
Box 6501, SE-113 83 Stockholm
Sweden
Hussain Gulzar Rammal
University of Technology Sydney (UTS) ( email )
15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia
HOME PAGE: http://www.uts.edu.au/staff/hussain.rammal
Michael Rezec
Sociovestix Labs - a DFKI spin-off
c/o German Research Center for
Artificial Intelligence (DFKI)
Kaiserslautern, 67663
Germany
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