A comparative analysis of the performance of conventional and Islamic unit trust companies in Malaysia
AbstractPurpose – The purpose of this paper is to investigate the efficiency of selected conventional and Islamic unit trust companies in Malaysia during the period 2002 to 2005. Design/methodology/approach – The paper adopts Data Envelopment Analysis (DEA) to investigate efficiency, as measured by the Malmquist index, which is decomposed into two components: efficiency change and technical change indexes. Findings – The study indicates that technical efficiency is the main contributor to enhancing the efficiency of the Malaysian unit trust industry. In addition, the larger the size of the unit trust companies, the more inefficient the performance. In comparing the efficiency of unit trust companies, the study finds that some of the Islamic unit trust companies perform better than their conventional counterparts. Research limitations/implications – The study is limited to five Islamic unit trust companies. Thus, the findings of this study are indicative, but inconclusive for the unit trust industry as a whole. Practical implications – The results have two important implications for both conventional and Islamic unit trust companies in Malaysia. First, the deterioration of total factor productivity (TFP) in the unit trust industry in Malaysia is due to the deficiency of innovation in technical components. Second, the size of the unit trust companies has an adverse effect on the TFP performance. Originality/value – The contribution of this study is that it analyzes the efficiency of the two types of unit trust industry which are important and relevant for Malaysia. This significance arises from the dual financial system, in which the Islamic unit trust companies operate in parallel with their conventional counterparts. The comparison sheds some light on the performance of the Islamic unit trust companies, whose operations are based on profit-sharing, in contrast to the conventional unit trust companies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal International Journal of Managerial Finance.
Volume (Year): 6 (2010)
Issue (Month): 1 (February)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yuengert, Andrew M., 1993. "The measurement of efficiency in life insurance: Estimates of a mixed normal-gamma error model," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 483-496, April.
- Chang, Eric C & Lewellen, Wilbur G, 1984. "Market Timing and Mutual Fund Investment Performance," The Journal of Business, University of Chicago Press, vol. 57(1), pages 57-72, January.
- Fikriyah Abdullah & Taufiq Hassan & Shamsher Mohamad, 2007. "Investigation of performance of Malaysian Islamic unit trust funds: Comparison with conventional unit trust funds," Managerial Finance, Emerald Group Publishing, vol. 33(2), pages 142-153.
- Andrew M. Yuengert, 1993. "The measurement of efficiency in life insurance estimates of a mixed normal-gamma error model," Research Paper 9308, Federal Reserve Bank of New York.
- Jensen, Michael C, 1969. "Risk, The Pricing of Capital Assets, and the Evaluation of Investment Portfolios," The Journal of Business, University of Chicago Press, vol. 42(2), pages 167-247, April.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Varian, Hal R., 1983. "Nonparametric Tests of Models of Investor Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(03), pages 269-278, September.
- Murthi, B. P. S. & Choi, Yoon K. & Desai, Preyas, 1997. "Efficiency of mutual funds and portfolio performance measurement: A non-parametric approach," European Journal of Operational Research, Elsevier, vol. 98(2), pages 408-418, April.
- Bawa, Vijay S, 1976. "Admissible Portfolios for All Individuals," Journal of Finance, American Finance Association, vol. 31(4), pages 1169-83, September.
- Banker, Rajiv D. & Thrall, R. M., 1992. "Estimation of returns to scale using data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 62(1), pages 74-84, October.
- Fauziah Md. Taib & Mansor Isa, 2007. "Malaysian unit trust aggregate performance," Managerial Finance, Emerald Group Publishing, vol. 33(2), pages 102-121.
- Loren W. Tauer, 1998. "Productivity of New York Dairy Farms Measured by Nonparametric Malmquist Indices," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 234-249.
- Avkiran, Necmi K., 2001. "Investigating technical and scale efficiencies of Australian Universities through data envelopment analysis," Socio-Economic Planning Sciences, Elsevier, vol. 35(1), pages 57-80, March.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Daraio, Cinzia & Simar, Leopold, 2006. "A robust nonparametric approach to evaluate and explain the performance of mutual funds," European Journal of Operational Research, Elsevier, vol. 175(1), pages 516-542, November.
- Drake, L & Howcroft, B, 1994. "Relative efficiency in the branch network of a UK bank: An empirical study," Omega, Elsevier, vol. 22(1), pages 83-90, January.
- Mains, Norman E, 1977. "Risk, the Pricing of Capital Assets, and the Evaluation of Investment Portfolios: Comment," The Journal of Business, University of Chicago Press, vol. 50(3), pages 371-84, July.
- R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
- Soo-Wah Low, 2007. "Malaysian unit trust funds’ performance during up and down market conditions: A comparison of market benchmark," Managerial Finance, Emerald Group Publishing, vol. 33(2), pages 154-166.
- Troutt, Marvin D. & Hu, Michael Y. & Shanker, Murali S., 2005. "A distribution-free approach to estimating best response values with application to mutual fund performance modeling," European Journal of Operational Research, Elsevier, vol. 166(2), pages 520-527, October.
- Abdelbari El Khamlichi & Mohamed Arouri & Frédéric Teulon, 2014. "Persistence of Performance Using the Four-Factor Pricing Model: Evidence from Dow Jones Islamic Index," Working Papers 2014-216, Department of Research, Ipag Business School.
- Abdelbari El Khamlichi & Kamel Laaradh & Mohamed Arouri & Frédéric Teulon, 2014. "Performance Persistence of Islamic Equity Mutual Funds," Working Papers 2014-115, Department of Research, Ipag Business School.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).
If references are entirely missing, you can add them using this form.