Comparative risk adjusted performance of Islamic,socially responsible and conventional funds: Evidence from United Kingdom |
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Affiliation: | 1. KEGDE Business School. Rue Antoine Bourdelle Domaine de Luminy BP921 13288 Marseille Cedex 9 , Marseille , France;2. KEDGE Business School and LEST (UMR CNRS 7317), Marseille, Francen;1. Campus Saint-Jean, University of Alberta, 8721 88 Av NW, Edmonton AB T6C 4G9, Canada;2. Glendon College, York University, 2275 Bayview Avenue, Toronto YH 330, Canada |
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Abstract: | This study investigates the risk and return characteristics of Islamic funds in comparison with SRI and the conventional open-end mutual funds for the UK, which, having attracted over £11.7 billion in Islamic investment in the past decade has emerged as the largest financial market for Islamic funds in the west. In addition, contrasting with previous literature, this research categorizes SRI and Islamic funds into two distinct types in order to allow a fair comparison. Our findings demonstrate that Islamic and SRI funds in general perform close to the conventional funds with significantly better risk-return tradeoff in US focused funds. Results further indicate that the UK-based Islamic and SRI funds were less effected during financial crisis as the magnitude of loss was significantly lower for them when compared to conventional funds. The research suggests that Islamic and SRI funds do provide a rational substitute and investors can benefit from investing in these funds as ethic and faith-based screening criteria do not affect the returns of Islamic and SRI funds adversely. This was also substantiated by our findings on investment behavior of these funds. |
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Keywords: | Risk adjusted performance Mutual Funds Islamic funds Socially responsible funds |
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