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The contribution of market movements, asset allocation, and active management to Islamic equity funds' performance

Peilles, Jonathan; Erragragui, Elisa; Bitar, Mohammad; Benlemlih, Mohammed

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Authors

Jonathan Peilles

Elisa Erragragui

Mohammed Benlemlih



Abstract

© 2018 Board of Trustees of the University of Illinois Where the performance of Islamic equity funds (IEFs) comes from? Is it from market movements, asset allocation policy or from active portfolio management? Our study is the first to tackle this question in the Islamic funds context. We use a database covering 281 IEFs for the period 2007-2016, and we test the role of each factor in explaining their returns. We find that market movements dominate the others components explaining nearly 50% of the monthly return variability and that, taking together, asset allocation policy and active management explain approximately the second half of IEFs returns. We argue that the IEFs underperformance observed by the existing literature could come from an inefficient and too important active portfolio management.

Citation

Peilles, J., Erragragui, E., Bitar, M., & Benlemlih, M. (2019). The contribution of market movements, asset allocation, and active management to Islamic equity funds' performance. Quarterly Review of Economics and Finance, 74, 32-38. https://doi.org/10.1016/j.qref.2018.03.013

Journal Article Type Article
Acceptance Date Mar 19, 2018
Online Publication Date Mar 22, 2018
Publication Date 2019-11
Deposit Date Oct 9, 2019
Publicly Available Date Mar 28, 2024
Journal The Quarterly Review of Economics and Finance
Print ISSN 1062-9769
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 74
Pages 32-38
DOI https://doi.org/10.1016/j.qref.2018.03.013
Keywords active management; asset allocation; Islamic equity funds; performance attribution 2
Public URL https://nottingham-repository.worktribe.com/output/2792251
Publisher URL https://www.sciencedirect.com/science/article/pii/S1062976917303186

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