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Is ethical money sensitive to past returns? The case of portfolio constraints and persistence in Islamic funds.

Abdelsalam, O. and Duygun, M. and Matallín, J. C. and Tortosa-Ausina, E. (2017) 'Is ethical money sensitive to past returns? The case of portfolio constraints and persistence in Islamic funds.', Journal of financial services research., 51 (3). pp. 363-384.

Abstract

In this paper, we analyze the performance persistence and survivorship bias of Islamic funds. The remarkable growth of these types of ethical funds raises the question of how non-financial attributes, including beliefs and value systems, influence performance and its persistence. A procedure commonly used in prior literature to assess persistence is the measuring of the performance of investment strategies based on past performance. In this context, we propose a refined version of this methodology that controls the cross-sectional significance of the performance of these strategies. This procedure correctly identifies whether abnormal performance is due to a dynamic investment strategy based on past performance, or whether it is obtained by investing in a particular set of mutual funds. The significance of the persistence varies depending on the time horizon (yearly/half-yearly), survivorship, or the tail of the distribution. In particular, we find that persistence only exists for the best funds, whereas for the worst funds, the results are not significant.

Item Type:Article
Full text:(AM) Accepted Manuscript
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Status:Peer-reviewed
Publisher Web site:https://doi.org/10.1007/s10693-015-0234-x
Publisher statement:The final publication is available at Springer via https://doi.org/10.1007/s10693-015-0234-x
Record Created:11 Nov 2015 09:50
Last Modified:09 May 2017 15:35

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