Is Ethical Money Sensitive to Past Returns? The Case of Portfolio Constraints and Persistence in Islamic Funds

Abstract

In this paper, we analyze the performance persistence and survivorship bias of Islamic funds. The remarkable growth of these types of ethical funds raises the question of how non-financial attributes, including beliefs and value systems, influence performance and its persistence. A procedure commonly used in prior literature to assess persistence is the measuring of the performance of investment strategies based on past performance. In this context, we propose a refined version of this methodology that controls the cross-sectional significance of the performance of these strategies. This procedure correctly identifies whether abnormal performance is due to a dynamic investment strategy based on past performance, or whether it is obtained by investing in a particular set of mutual funds. The We thank an anonymous referee, the co-editor, Sanjiv Das, and the editor, Haluk¨UnalHaluk¨ Haluk¨Unal, whose comments helped greatly in the overall improvement of the article, as well as those by Mohamed Shaban on a preliminary version.

Citation

Abdelsalam, O., Duygun, M., Matallín-Sáez, J. C., & Tortosa-Ausina, E. (2017). Is Ethical Money Sensitive to Past Returns? The Case of Portfolio Constraints and Persistence in Islamic Funds. Journal of Financial Services Research, 51(3), 363-384. https://doi.org/10.1007/s10693-015-0234-x

• Journal Article Type: Article
• Acceptance Date: Nov 1, 2015
• Online Publication Date: Dec 1, 2015
• Publication Date: 2017-06
• Deposit Date: Mar 11, 2019
• Journal: Journal of Financial Services Research
• Print ISSN: 0920-8550
• Electronic ISSN: 1573-0735
• Publisher: Humana Press
• Peer Reviewed: Peer Reviewed
• Volume: 51
• Issue: 3
• Pages: 363-384
• DOI: https://doi.org/10.1007/s10693-015-0234-x
• Public URL: https://nottingham-repository.worktribe.com/output/1624560
• Publisher URL: https://link.springer.com/content/pdf/10.1007%2Fs10693-015-0234-x.pdf