The Islamic mutual fund performance: New evidence on market timing and stock selectivity

This study evaluates overall monthly performances of 128 Islamic mutual funds (IMFs) for the period of January 1990 to April 2009. It employs Sharpe, Treynor and Jensen ratios to the risk-adjusted return performance based on extended version of CAPM model. The evidence based on aggregate returns performance reveals, on average IMFs in Malaysia outperform its Conventional peers and the market portfolio proxy by the KLCI return. It also shows the significantly positive stock selectivity skill and market timing ability among Islamic and Conventional mutual fund Managers in Malaysia, and indicates that IMFs fund managers have superior performance in stock selectivity skill, but inferior performance in market timing ability relative to their conventional counterparts.