LUCRATIVENESS OF ISLAMIC VS CONVENTIONAL MUTUAL FUNDS IN PAKISTAN

Bilal Nafees, Muhammad Ali Jibran Qamar, Nisar Ahmed

Abstract


The purpose of this study is to conduct a comparative risk
adjusted performance, selectivity skills and market timing abilities
analysis of Islamic and Conventional mutual funds in Pakistan. The
study utilizes various risk-adjusted performance measures to evaluate
risk and return characteristics. The study also used technique
proposed by (Treynor and Mazuy 1966) and (Henriksson and Merton
1981) to appraise selectivity skills and timing abilities on the data
set ranging 2009-2013 of Islamic and Conventional mutual funds. In
this study, four categories Aggressive Fixed Income, Asset Allocation,
Equity and Balanced open end mutual funds are analysed. On the
basis of evidences found, only few mutual fund managers from Islamic
and Conventional mutual funds hold better stock picking skills. The
mutual fund managers of both Islamic and conventional mutual funds
are found to be a poor market timer in Pakistan. Islamic mutual
funds have earned better returns than conventional mutual funds.
Therefore, risk adjusted performance of Islamic mutual funds is better
than conventional mutual funds.


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