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Fund-Specific Determinants of Performance: An Empirical Study of Islamic and Conventional Mutual Funds of Pakistan

Author

Listed:
  • Yaqoob Ahmad

    (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)

  • Guangguo Sun

    (School of Accounting, Dongbei University of Finance and Economics, Dalian, China)

  • Waqas Bin Khidmat

    (School of Accounting, Dongbei University of Finance and Economics, Dalian, China.)

Abstract

This study is an attempt to investigate the fund-specific determinants of performance of conventional and Islamic mutual funds in Pakistan. For this purpose, Sharpe Ratio, Sortino Ratio, Information Ratio and Jensen Alpha are used as proxies of funds' performance. We examine several fund-specific characteristics as potential determinants of fund performance such as fund size, turnover, liquidity, management fee, expense ratio, new money, fund age and fund family. A sample of 100 open ended mutual funds were evaluated for a period from 2011-2016. This sample is further divided into overall, conventional and Islamic funds. Data was extracted from the annual reports of mutual funds, business recorder and the daily NAV is obtained from the website of Mutual Fund Association of Pakistan. Fixed and Random effect methodology is used for the data analysis of this study. The result shows that turnover and new money have a significant positive impact on Sharpe ratio for all three samples of funds. Liquidity is positively and significantly related with Sharpe ratio in case of Islamic funds while for conventional funds age has a significant positive effect on fund's performance. Expense ratio is negatively associated with Sharpe ratio in case of conventional funds. The finding suggested that turnover, liquidity and new money demonstrates significant positive relation with information ratio for conventional funds. On the contrary, Islamic funds' performance is worsen by the new money. Sortino ratio is influenced significantly positive by fund family and fund age for all the three sample of funds. Turnover has a positive impact on the Sortino ratio of Islamic funds while management fees has negative influence on the Sortino ratio .Fund family and liquidity has been found to be significantly positively related with Jensen alpha of conventional funds while new money has significant negative effect on the Jensen alpha.

Suggested Citation

  • Yaqoob Ahmad & Guangguo Sun & Waqas Bin Khidmat, 2017. "Fund-Specific Determinants of Performance: An Empirical Study of Islamic and Conventional Mutual Funds of Pakistan," International Journal of Economics and Financial Issues, Econjournals, vol. 7(5), pages 359-370.
    • Handle: RePEc:eco:journ1:2017-05-43
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    References listed on IDEAS

    as
    1. Bollen, Nicolas P. B., 2007. "Mutual Fund Attributes and Investor Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(3), pages 683-708, September.
    2. Bauer, Rob & Koedijk, Kees & Otten, Roger, 2005. "International evidence on ethical mutual fund performance and investment style," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1751-1767, July.
    3. David Blake & Allan Timmermann, 1998. "Mutual Fund Performance: Evidence from the UK," Review of Finance, European Finance Association, vol. 2(1), pages 57-77.
    4. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    5. Samira Ben Belgacem & Slaheddine Hellara, 2011. "Predicting Tunisian mutual fund performance using dynamic panel data model," Journal of Risk Finance, Emerald Group Publishing, vol. 12(3), pages 208-225, May.
    6. Agnesens, Julius, 2013. "A statistically robust decomposition of mutual fund performance," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3867-3877.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    Mutual Fund; Fund-Specific Determinants; Performance; Pakistan. JEL Classification s: G10; G23 /> // Provide a local fallback if the CDN cannot be reached if (typeof google == 'undefined') { document.write(unescape(%3Cscript src='https://www.econjournals.com/lib/pkp/js/lib/jquery/jquery.min.js' type='text/javascript'%3E%3C/script%3E)); document.write(unescape(%3Cscript src='https://www.econjournals.com/lib/pkp/js/lib/jquery/plugins/jqueryUi.min.js' type='text/javascript'%3E%3C/script%3E)); } else { google.load(jquery; 1.4.4); google.load(jqueryui; 1.8.6); } International Journal of Economics and Financial Issues Open Journal Systems Journal Help User Username Password Remember me Notifications View Subscribe Journal Content Search Search Scope All Authors Title Abstract Index terms Full Text Browse By Issue By Author By Title Other Journals Font Size Information For Readers For Authors For Librarians Home About Login Register Search Current Archives Announcements EDITORIAL BOARD SUBMISSIONS INDEXING/ABSTRACTING CONTACT Home > Vol 7; No 5 (2017) > Ahmad Fund-Specific Determinants of Performance: An Empirical Study of Islamic and Conventional Mutual Funds of Pakistan Yaqoob Ahmad; Guangguo Sun; Waqas Bin Khidmat Abstract This study is an attempt to investigate the fund-specific determinants of performance of conventional and Islamic mutual funds in Pakistan. For this purpose; Sharpe Ratio; Sortino Ratio; Information Ratio and Jensen Alpha are used as proxies of funds' performance. We examine several fund-specific characteristics as potential determinants of fund performance such as fund size; turnover; liquidity; management fee; expense ratio; new money; fund age and fund family. A sample of 100 open ended mutual funds were evaluated for a period from 2011-2016. This sample is further divided into overall; conventional and Islamic funds. Data was extracted from the annual reports of mutual funds; business recorder and the daily NAV is obtained from the website of Mutual Fund Association of Pakistan. Fixed and Random effect methodology is used for the data analysis of this study. The result shows that turnover and new money have a significant positive impact on Sharpe ratio for all three samples of funds. Liquidity is positively and significantly related with Sharpe ratio in case of Islamic funds while for conventional funds age has a significant positive effect on fund's performance. Expense ratio is negatively associated with Sharpe ratio in case of conventional funds. The finding suggested that turnover; liquidity and new money demonstrates significant positive relation with information ratio for conventional funds. On the contrary; Islamic funds' performance is worsen by the new money. Sortino ratio is influenced significantly positive by fund family and fund age for all the three sample of funds. Turnover has a positive impact on the Sortino ratio of Islamic funds while management fees has negative influence on the Sortino ratio .Fund family and liquidity has been found to be significantly positively related with Jensen alpha of conventional funds while new money has significant negative effect on the Jensen alpha.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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