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Performance of Islamic and conventional exchange traded funds in Malaysia

Author

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  • Diaw, Abdou
  • Hassan, Salwana
  • Ng Boon Ka, Adam

Abstract

ETFs have attracted many investors as one of the most innovative products of financial engineering. By virtue of the nascent nature of MyETF-DJIM Titan 25 and FBM 30ETF in Malaysia, comparative performance studies are essential during a financial crisis. MyETF is different from FBM 30ETF in terms of investment scope and ShariÑah governance structure. While MyETF has achieved its objective in tracking its index, FBM 30ETF has failed in this respect. Despite its higher total risk, MyETF performed better than its index. The same applies in the case of FBM 30ETF. Although MyETF has bigger net assets, economies of scale, and better diversification, the performances of the two funds are lacklustre and similar, with FBM 30ETF performing somewhat better. Notwithstanding their success to outperform their respective benchmarks, both ETFs had comparable negative performance, with decline in prices and NAV. The negative returns have caused abnormality in their measurements.

Suggested Citation

  • Diaw, Abdou & Hassan, Salwana & Ng Boon Ka, Adam, 2010. "Performance of Islamic and conventional exchange traded funds in Malaysia," MPRA Paper 32601, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:32601
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    References listed on IDEAS

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    1. Harper, Joel T. & Madura, Jeff & Schnusenberg, Oliver, 2006. "Performance comparison between exchange-traded funds and closed-end country funds," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 104-122, April.
    2. Ackert, Lucy F. & Tian, Yisong S., 2001. "Efficiency in index options markets and trading in stock baskets," Journal of Banking & Finance, Elsevier, vol. 25(9), pages 1607-1634, September.
    3. Lim, Kian-Ping & Brooks, Robert D. & Kim, Jae H., 2008. "Financial crisis and stock market efficiency: Empirical evidence from Asian countries," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 571-591, June.
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    Cited by:

    1. Farouk, Faizal & Masih, Mansur, 2016. "Are there profit (returns) in Shariah-compliant exchange traded funds? The multiscale propensity," Research in International Business and Finance, Elsevier, vol. 38(C), pages 360-375.
    2. Hassan, M. Kabir & Kayhana, Selim & Bayatb, Tayfur, 2016. "The Relation between Return and Volatility in ETFs Traded in Borsa Istanbul: Is there any Difference between Islamic and Conventional ETFs?," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 24, pages 45-76.
    3. Farouk, Faizal & Masih, Mansur, 2017. "Lead-lag relationship between islamic ETF price and strategic commodities: evidence from Malaysia," MPRA Paper 104977, University Library of Munich, Germany.

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    More about this item

    Keywords

    Islamic Capital market; Islamic ETF; MyETF; FBM 30ETF; Trading; Performance;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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