Intertemporal Test of Beta Stationarity Performance of Islamic Sector Structured Mutual Funds
By Mahmoud Haddad, Ghassem Homaifar, Said Elfakhani and Hikmat Ahmedov
Abstract: "The purpose of this research paper is to examine social Islamic mutual funds’ financial performance. Since Islamic mutual funds have only been around for the past two decades, most of the research on this topic is fairly new. In this study we apply the single factor model of Schwert and Seguin (1990) to a sample of Islamic mutual funds. The Islamic mutual funds market is one of the fastest growing sectors within the Islamic financial system. Several studies have investigated the characteristics of individual Islamic mutual funds (see Elfakhani, et al (2006), Elfakhani ,et al (2005), and Hassan, et al (2005). We are not aware of any studies that have applied the Schwert and Seguin methodology to Islamic mutual funds. Such an application is important because it allows for studying the impact of market volatility on the time variation of monthly betas and the corresponding returns. Using the S&P 500 and the FTSE Global Islamic indices on sector structured Islamic mutual funds, our results suggest that the volatility of the market and that of the Islamic mutual funds portfolio behave differently with inter and intra market proxies. There is also evidence that the volatility persistence of each Islamic mutual fund portfolio and its systematic risk are significantly related. Hence, the systematic risks of different portfolios tend to move in a different direction during periods of increased market volatility. As a result, we gain an insight into the return dynamics and the process by which Islamic mutual funds prices are determined."
Intertemporal Test of Beta Stationarity Performance of Islamic Sector Structured Mutual Funds
