Performances of Sharia Mutual Funds in Indonesia: Empirical Evidence from a Developing Economy
DOI:
https://doi.org/10.13135/2421-2172/5896Keywords:
Performance; Mutual Fund; Sharpe RatioAbstract
This study aims to analyze the performances of Sharia mutual funds, especially in the Sharia mutual funds on stocks, money market, fixed income, and mixed funds. To enact such a purpose, a descriptive quantitative approach was used in the investigation of on Sharia mutual funds listed in Indonesia Stock Exchange 2015-2020 following the criteria of Sharia mutual funds of actively operate in Indonesia stock exchange which has great performance seen from Net Asset Value (NAV). The data analysis was carried out using phases of determining the rate of return calculated from NAV, the measurement of total risk with the standard deviation proxy, and the measurement of its performance using Sharpe ratio. The results indicate that fixed return of Sharia mutual fund carries the best performance compared to the stock, money market, and mixed investment funds. It has a higher return per unit risk and maximum probability of investment return above the income with riskfree. These research findings can be a reference for investors, primarily those who follow Sharia rules, in making mutual funds investment related decision in the future. They also can consider the Sharpe ratio to select the type of Sharia mutual funds in Indonesia, as the proper hedge investment.
References
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[32] Rubio, J.F. et al. 2012. Non‐parametric performance measurement of international and Islamic mutual funds. Accounting Research Journal. 25, 3 (Nov. 2012), 208–226. DOI:https://doi.org/10.1108/10309611211290176.
[33] Samarbakhsh, L. and Shah, M. 2021. Fixed income mutual fund performance during and after a crisis: a Canadian case. Journal of Economics and Finance. (Mar. 2021). DOI:https://doi.org/10.1007/s12197-021-09541-z.
[34] Shanmugam, B. and Zaha Rina Zahari 2009. A primer on Islamic finance. Research Foundation of CFA Institute.
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[39] Wang, C.D. et al. 2020. Asset selection based on high frequency Sharpe ratio. Journal of Econometrics. (Sep. 2020), S0304407620302244. DOI:https://doi.org/10.1016/j.jeconom.2020.05.007.
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[41] Yudanto, A.A. 2017. Performance Analysis of Sharia and Conventional Mutual Funds During 2008 and 2013 Crisis Periods. INFO ARTHA. 1, (Jun. 2017), 39–60. DOI :https://doi.org/10.31092/jia.v1i1.69.
[2] Abbas, A. and Frihatni, A.A. 2020. The Social Role of Islamic Banks in Indonesia during the Pandemic of COVID-19. European Journal of Islamic Finance. (Dec. 2020), No 16 (2020): "Islamic Finance Role in the Time of COVID19 Pandemic: The Way Out during and after Emergency". DOI:https://doi.org/10.13135/2421-2172/4914.
[3] Abdullah, F. et al. 2007. Investigation of performance of Malaysian Islamic unit trust funds: Comparison with conventional unit trust funds. Managerial Finance. 33, 2 (Jan. 2007), 142–153. DOI:https://doi.org/10.1108/03074350710715854.
[4] Abedifar, P. et al. 2015. Islamic Banking and Finance: Recent Empirical Literature And Directions For Future Research: Islamic Banking and Finance. Journal of Economic Surveys. 29, 4 (Sep. 2015), 637–670. DOI:https://doi.org/10.1111/joes.12113.
[5] Agussalim, M. et al. 2017. Mutual Funds Performance: Conventional and Sharia Product. International Journal of Economics and Financial Issues. 7, 4 (Jul. 2017), 150–156.
[6] Arouri, M. and Teulon, F. 2014. Persistence Of Performance Using The Four-Factor Pricing Model: Evidence From Dow Jones Islamic Index. Journal of Applied Business Research (JABR). 30, 3 (Apr. 2014), 917. DOI:https://doi.org/10.19030/jabr.v30i3.8577.
[7] Ashraf, D. 2013. Performance evaluation of Islamic mutual funds relative to conventional funds: Empirical evidence from Saudi Arabia. International Journal of Islamic and Middle Eastern Finance and Management. 6, 2 (Jun. 2013), 105–121. DOI:https://doi.org/10.1108/17538391311329815.
[8] Ayadi, M.A. et al. 2018. Performance of fixed-income mutual funds with regime-switching models. The Quarterly Review of Economics and Finance. 69, (Aug. 2018), 217–231. DOI:https://doi.org/10.1016/j.qref.2018.03.005.
[9] Biancone, P.P. and Radwan, M. 2018. Sharia-Compliant financing for public utility infrastructure. Utilities Policy. 52, (Jun. 2018), 88–94. DOI:https://doi.org/10.1016/j.jup.2018.03.006.
[10] Calder, R. 2020. Sharīʿah-compliant or Sharīʿah-based? The Changing Ethical Discourse of Islamic Finance. Arab Law Quarterly. (Mar. 2020), 1–24. DOI:https://doi.org/10.1163/15730255-BJA10008.
[11] Castro, E. et al. 2020. Relative performance of religious and ethical investment funds. Journal of Islamic Accounting and Business Research. 11, 6 (Jan. 2020), 1227–1244. DOI:https://doi.org/10.1108/JIABR-04-2019-0084.
[12] Dulock, H.L. 1993. Research Design: Descriptive Research. Journal of Pediatric Oncology Nursing. 10, 4 (Oct. 1993), 154–157. DOI:https://doi.org/10.1177/104345429301000406.
[13] Ghoul, W. and Karam, P. 2007. MRI and SRI Mutual Funds: A Comparison of Christian, Islamic (Morally Responsible Investing), and Socially Responsible Investing (SRI) Mutual Funds. The Journal of Investing. 16, 2 (May 2007), 96–102. DOI:https://doi.org/10.3905/joi.2007.686416.
[14] Harris, L.E. et al. 2015. Juicing the dividend yield: Mutual funds and the demand for dividends. Journal of Financial Economics. 116, 3 (Jun. 2015), 433–451. DOI:https://doi.org/10.1016/j.jfineco.2015.04.001.
[15] Hashim, N. 2008. The FTSE Global Islamic and the Risk Dilemma. AIUB Bus Econ Working Paper Series, No 2008-08 (2008).
[16] Hassan, A. et al. 2020. Performance measurement of Islamic mutual funds using DEA method. Journal of Islamic Accounting and Business Research. 11, 8 (Jan. 2020), 1481–1496. DOI:https://doi.org/10.1108/JIABR-04-2018-0053.
[17] Hassan, A. and Mollah, S. 2018. Islamic Mutual Funds: A Vehicle for Mobilization of Small Savings. Islamic Finance. Springer International Publishing. 111–116.
[18] Hayat, R. and Kraeussl, R. 2011. Risk and return characteristics of Islamic equity funds. Emerging Markets Review. 12, 2 (Jun. 2011), 189–203. DOI:https://doi.org/10.1016/j.ememar.2011.02.002.
[19] Hoepner, A.G.F. et al. 2011. Islamic mutual funds’ financial performance and international investment style: evidence from 20 countries. The European Journal of Finance. 17, 9–10 (Nov. 2011), 829–850. DOI:https://doi.org/10.1080/1351847X.2010.538521.
[20] Hussein, K. and Omran, M. 2005. Ethical Investment Revisited: Evidence from Dow Jones Islamic Indexes. The Journal of Investing. 14, 3 (Aug. 2005), 105–126. DOI:https://doi.org/10.3905/joi.2005.580557.
[21] Kosowski, R. 2011. Do Mutual Funds Perform When It Matters Most to Investors? US Mutual Fund Performance and Risk in Recessions and Expansions. Quarterly Journal of Finance. 01, 03 (Sep. 2011), 607–664. DOI:https://doi.org/10.1142/S2010139211000146.
[22] Mahfooz, S. and Ahmed, H. 2014. Shariah Investment Screening Criteria: A Critical Review. Journal of King Abdulaziz University-Islamic Economics. 27, 1 (2014). DOI:https://doi.org/10.4197/Islec.27-1.1.
[23] Mansor, F. and Bhatti, M.I. 2016. Evidence of Risk and Return Performance of Islamic Mutual Funds: The Case of Malaysia. Advances in Islamic Finance, Marketing, and Management. D.S. Mutum et al., eds. Emerald Group Publishing Limited. 81–101.
[24] McLeod, W. and van Vuuren, G. 2004. Interpreting the Sharpe ratio when excess returns are negative. Investment Analysts Journal. 33, 59 (Jan. 2004), 15–20. DOI:https://doi.org/10.1080/10293523.2004.11082455.
[25] Merdad, H. et al. 2016. Does Faith Matter in Mutual Funds Investing? Evidence from Saudi Arabia. Emerging Markets Finance and Trade. 52, 4 (Apr. 2016), 938–960. DOI:https://doi.org/10.1080/1540496X.2015.1025655.
[26] Merdad, H. and Hassan, M.K. 2011. Performance of Islamic Mutual Funds in Saudi Arabia. (Doha, 2011).
[27] Muhammad, H. 2020. Holistic Practice of Fiqh Al-Muamalat: Halal Accountability of Islamic Microfinance Institutions. Nusantara Halal Journal (Halal awareness, opinion, research, and initiative). 1, 1 (2020), 22–31. DOI:https://doi.org/10.17977/um060.2020v1p022-031.
[28] Naveed, F. et al. 2020. Are Islamic mutual funds exposed to lower risk compared to their conventional counterparts?: Empirical evidence from Pakistan. ISRA International Journal of Islamic Finance. 12, 1 (Apr. 2020), 69–87. DOI:https://doi.org/10.1108/IJIF-01-2019-0012.
[29] Naveed, F. 2020. Institutional shareholding and the dividend payout policy of Islamic mutual funds: Evidence from international Islamic funds industry. Borsa Istanbul Review. (Sep. 2020), S221484502030051X. DOI:https://doi.org/10.1016/j.bir.2020.09.002.
[30] Poruchnyk, A. et al. 2021. Global economic crisis of 2020 and a new paradigm of countercyclical management. Problems and Perspectives in Management. 19, 1 (Mar. 2021), 397–415. DOI:https://doi.org/10.21511/ppm.19(1).2021.34.
[31] Robiyanto, R. et al. 2019. Sharia mutual funds performance in Indonesia. Business: Theory and Practice. 20, (Jan. 2019), 11–18. DOI:https://doi.org/10.3846/btp.2019.02.
[32] Rubio, J.F. et al. 2012. Non‐parametric performance measurement of international and Islamic mutual funds. Accounting Research Journal. 25, 3 (Nov. 2012), 208–226. DOI:https://doi.org/10.1108/10309611211290176.
[33] Samarbakhsh, L. and Shah, M. 2021. Fixed income mutual fund performance during and after a crisis: a Canadian case. Journal of Economics and Finance. (Mar. 2021). DOI:https://doi.org/10.1007/s12197-021-09541-z.
[34] Shanmugam, B. and Zaha Rina Zahari 2009. A primer on Islamic finance. Research Foundation of CFA Institute.
[35] Sharpe, W.F. 1966. Mutual Fund Performance. The Journal of Business. 39, 1 (1966), 119–138.
[36] Statistik Reksa Dana Syariah - Desember 2020: https://www.ojk.go.id/id/kanal/syariah/data-dan-statistik/reksa-dana-syariah/Pages/Statistik-Reksa-Dana-Syariah---Desember-2020.aspx. Accessed: 2021-08-03.
[37] Visser, H. 2019. Islamic finance: principles and practice.
[38] Walkshäusl, C. and Lobe, S. 2012. Islamic investing. Review of Financial Economics. 21, 2 (Apr. 2012), 53–62. DOI:https://doi.org/10.1016/j.rfe.2012.03.002.
[39] Wang, C.D. et al. 2020. Asset selection based on high frequency Sharpe ratio. Journal of Econometrics. (Sep. 2020), S0304407620302244. DOI:https://doi.org/10.1016/j.jeconom.2020.05.007.
[40] Yang, T. and Hou, W. 2016. Pay-performance sensitivity and risk-taking behaviors: Evidence from closed-end funds. Emerging Markets Review. 29, (Dec. 2016), 274–288. DOI:https://doi.org/10.1016/j.ememar.2016.08.015.
[41] Yudanto, A.A. 2017. Performance Analysis of Sharia and Conventional Mutual Funds During 2008 and 2013 Crisis Periods. INFO ARTHA. 1, (Jun. 2017), 39–60. DOI :https://doi.org/10.31092/jia.v1i1.69.
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Published
2021-08-31
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Muhammad, H., Sari, N. P., & Nafisa, A. (2021). Performances of Sharia Mutual Funds in Indonesia: Empirical Evidence from a Developing Economy. European Journal of Islamic Finance, (18). https://doi.org/10.13135/2421-2172/5896
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