LUCRATIVENESS OF ISLAMIC VS CONVENTIONAL MUTUAL FUNDS IN PAKISTAN

Abstract

The purpose of this study is to conduct a comparative risk adjusted performance, selectivity skills and market timing abilities analysis of Islamic and Conventional mutual funds in Pakistan. The study utilizes various risk-adjusted performance measures to evaluate risk and return characteristics. The study also used technique proposed by (Treynor and Mazuy 1966) and (Henriksson and Merton 1981) to appraise selectivity skills and timing abilities on the data set ranging 2009-2013 of Islamic and Conventional mutual funds. In this study, four categories Aggressive Fixed Income, Asset Allocation, Equity and Balanced open end mutual funds are analysed. On the basis of evidences found, only few mutual fund managers from Islamic and Conventional mutual funds hold better stock picking skills. The mutual fund managers of both Islamic and conventional mutual funds are found to be a poor market timer in Pakistan. Islamic mutual funds have earned better returns than conventional mutual funds. Therefore, risk adjusted performance of Islamic mutual funds is better than conventional mutual funds.