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Is Ethical Money Sensitive to Past Returns? The Case of Portfolio Constraints and Persistence in Islamic Funds

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

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Authors

M. Duygun

J.C. Matallín

E. Tortosa-Ausina



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.

Citation

Abdelsalam, O., Duygun, M., Matallín, J., & 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), 363-384. https://doi.org/10.1007/s10693-015-0234-x

Journal Article Type Article
Acceptance Date Nov 9, 2015
Online Publication Date Dec 1, 2015
Publication Date Jun 1, 2017
Deposit Date Nov 9, 2015
Publicly Available Date Mar 28, 2024
Journal Journal of Financial Services Research
Print ISSN 0920-8550
Electronic ISSN 1573-0735
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 51
Issue 3
Pages 363-384
DOI https://doi.org/10.1007/s10693-015-0234-x
Public URL https://durham-repository.worktribe.com/output/1398353

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