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

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

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 23, 2020
• Journal: The Quarterly Review of Economics and Finance
• Print ISSN: 1062-9769
• Electronic 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