Do ethics imply persistence? The case of Islamic and socially responsible funds

Abdelsalam, O.; Duygun, D.; Matallín-Sáez, J.C.; Tortosa-Ausina, E.

Abstract

We analyze the performance persistence of Islamic and Socially Responsible Investment (SRI) mutual funds. We adopt a multi-stage strategy in which, in the first stage, partial frontiers’ approaches are considered to measure the performance of the different funds in the sample. In the second stage, the results yielded by the partial frontiers are plugged into different investment strategies based on a recursive estimation methodology whose persistence performance is evaluated in the third stage of the analysis. Results indicate that, for both types of funds, performance persistence actually exists, but only for the worst and, most notably, best funds. This result is robust not only across methods (and different choices of tuning parameters within each method) but also across both SRI and Islamic funds—although in the case of the latter persistence was stronger for the best funds. The persistence of SRI and Islamic funds represents an important result for investors and the market, since it provides information on both which funds to invest in and which funds to avoid. Last but not least, the use of the aforementioned techniques in the context of mutual funds could also be of interest for the non-conclusive literature.

Citation

Abdelsalam, O., Duygun, D., Matallín-Sáez, J., & Tortosa-Ausina, E. (2014). Do ethics imply persistence? The case of Islamic and socially responsible funds. Journal of Banking and Finance, 40, 182-194. https://doi.org/10.1016/j.jbankfin.2013.11.027

• Journal Article Type: Article
• Acceptance Date: Nov 20, 2013
• Online Publication Date: Dec 1, 2013
• Publication Date: Mar 1, 2014
• Deposit Date: Oct 6, 2014
• Publicly Available Date: Feb 5, 2016
• Journal: Journal of Banking and Finance
• Print ISSN: 0378-4266
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 40
• Pages: 182-194
• DOI: https://doi.org/10.1016/j.jbankfin.2013.11.027
• Keywords: Islamic funds, Socially responsible investment funds, Performance, Persistence.
• Public URL: https://durham-repository.worktribe.com/output/1444512