Comparative performance between Islamic and conventional equity funds in Malaysia

• Main Author: Thohirah, Zainun
• Format: Thesis
• Language: English; English
• Published: 2016
• Subjects: HG Finance
• Online Access: https://etd.uum.edu.my/7615/1/s810265_01.pdf; https://etd.uum.edu.my/7615/2/s810265_02.pdf; https://etd.uum.edu.my/7615/; http://sierra.uum.edu.my/record=b1698766~S1

This study examines the relationship between Islamic and conventional equity funds for the period of January 2011 to December 2015. The performances of both types of funds are then compared to the market benchmark to determine whether they outperformed their respective market benchmark. The FTSE Bursa Malaysia EMAS Index (FBMEMAS) is used as the market benchmark for Islamic equity funds and FTSE Bursa Malaysia index (FBMKLCI) is used as the market benchmark for conventional equity funds. A total of 18 Islamic equity funds and 32 conventional equity funds are evaluated by using three performance measures namely Treynor index, Sharpe index and Jensen alpha. The weekly Net Asset Value (NAV) of the Islamic and conventional equity funds, the market benchmark of FBMEMAS and FBMKLCI were obtained from the Bloomberg database. The results indicate that the average returns of conventional equity funds are higher than the Islamic equity funds. Nevertheless, when compared against their respective benchmark, Islamic equity funds performed better than its Shariah benchmark while conventional underperform its composite benchmark. Conventional equity funds also have higher standard deviation than Islamic equity funds which implied that conventional equity funds are more risky than Islamic equity funds. Additionally, systematic risk analysis shows that Islamic equity funds have lower beta value than conventional equity funds; hence it shows that Islamic equity funds are less sensitive to the changes in the market. This study could be further investigated in a bigger sample and characteristics while performance can be measured using other technique than Sharpe index, Treynor index and Jensen alpha.