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

Author

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  • Jonathan Peillex

    (CRIISEA - Centre de Recherche sur les Institutions, l'Industrie et les Systèmes Économiques d'Amiens - UR UPJV 3908 - UPJV - Université de Picardie Jules Verne)

  • Elias Erragragui

    (Kedge Business School [Talence])

  • Mohammad Bitar

    (UON - University of Nottingham, UK)

  • Mohammed Benlemlih

    (Métis Lab EM Normandie - EM Normandie - École de Management de Normandie)

Abstract

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. \textcopyright 2018 Board of Trustees of the University of Illinois

Suggested Citation

  • Jonathan Peillex & Elias Erragragui & Mohammad Bitar & Mohammed Benlemlih, 2019. "The contribution of market movements, asset allocation and active management to Islamic equity funds' performance," Post-Print hal-03688864, HAL.
    • Handle: RePEc:hal:journl:hal-03688864
    DOI: 10.1016/j.qref.2018.03.013
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    Cited by:

    1. Peillex, Jonathan, 2023. "Réaction des investisseurs à la création de fonds éthiques [Investor reaction to the creation of ethical funds]," MPRA Paper 118930, University Library of Munich, Germany.
    2. Abid, Ilyes & Benlemlih, Mohammed & El Ouadghiri, Imane & Peillex, Jonathan & Urom, Christian, 2023. "Fossil fuel divestment and energy prices: Implications for economic agents," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 1-16.
    3. Delâtre, Chloë, 2022. "Désinvestissement des combustibles fossiles: quelles conséquences pour la gestion de portefeuille ? [Fossil fuel divestment and portfolios implications]," MPRA Paper 114633, University Library of Munich, Germany.

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