IDEAS home Printed from https://ideas.repec.org/a/eme/imefmp/imefm-07-2018-0230.html
   My bibliography  Save this article

Do fundamental portfolios outperform in the MENA equity markets?

Author

Listed:
  • Rasha Tawfiq Abadi
  • Florinda Silva

Abstract

Purpose - This study aims to investigate the performance of fundamental weighted portfolios (using sales, cash flows, dividends, book values and a composite of all these variables), an equal weighted portfolio and a smoothed cap-weighted (CW) portfolio in Middle East and North Africa (MENA) markets. The performance of these portfolios is compared with that of a CW portfolio for the period 2005 to 2015. Design/methodology/approach - The portfolios are formed using different concentration levels, different construction schemes and different sub-regions. The performance is assessed using a large set of risk-adjusted performance measures, including more robust measures in the context of multi-factor models, such as theFama and French (1993) three-factor model, theFama and French (2015) five-factor model and a seven-factor model. Findings - The results show that the fundamental portfolios, with the exception of the sales portfolio, underperform the CW portfolio using either the traditional or more robust risk-adjusted performance measures. The underperformance of the fundamental portfolios is found to be robust using different concentration levels, different construction schemes and different sub-regions. The results also show that the equal weighted portfolio outperforms the CW portfolio using traditional risk-adjusted measures. However, after controlling for additional risk factors, this outperformance disappears. Practical implications - The failure of fundamental indexation in the emerging markets could help the researchers and the academics to search for the best weighting method that could be used as an alternative to the CW indexation method. Originality/value - The results of the study add evidence to the debatable propositions on the performance of fundamental portfolios in emerging markets. Furthermore, the findings may help domestic and international investors, practitioners and decision-makers to deepen their knowledge in terms of the best portfolio construction scheme in the MENA region.

Suggested Citation

  • Rasha Tawfiq Abadi & Florinda Silva, 2019. "Do fundamental portfolios outperform in the MENA equity markets?," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 12(2), pages 265-281, June.
    • Handle: RePEc:eme:imefmp:imefm-07-2018-0230
    DOI: 10.1108/IMEFM-07-2018-0230
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/IMEFM-07-2018-0230/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/IMEFM-07-2018-0230/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/IMEFM-07-2018-0230?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amit Pandey & Anil Kumar Sharma, 2023. "Effect of Index Concentration on Index Volatility and Performance," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(3), pages 559-585, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:imefmp:imefm-07-2018-0230. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.