Ethical screening and financial performance : the case of Islamic equity funds

Nainggolan, Yunieta, How, Janice, & Verhoeven, Peter (2015) Ethical screening and financial performance : the case of Islamic equity funds. Journal of Business Ethics.

View at publisher

Abstract

Whether ethical screening affects portfolio performance is an important question that is yet to be settled in the literature. This paper aims to shed further light on this question by examining the performance of a large global sample of Islamic equity funds (IEFs) from 1984 to 2010. We find that IEFs underperform conventional funds by an average of 40 basis points per month, consistent with the underperformance hypothesis. In line with popular media claims that Islamic funds are a safer investment, IEFs outperformed conventional funds during the recent banking crisis. However, we find no such outperformance for other crises or high volatility periods. Based on fund holdings-based data, we provide evidence of a negative curvilinear relation between fund performance and ethical screening intensity, consistent with a return trade-off to being more ethical.

Impact and interest:

2 citations in Scopus
Search Google Scholar™
1 citations in Web of Science®

Citation counts are sourced monthly from Scopus and Web of Science® citation databases.

These databases contain citations from different subsets of available publications and different time periods and thus the citation count from each is usually different. Some works are not in either database and no count is displayed. Scopus includes citations from articles published in 1996 onwards, and Web of Science® generally from 1980 onwards.

Citations counts from the Google Scholar™ indexing service can be viewed at the linked Google Scholar™ search.

ID Code: 81843
Item Type: Journal Article
Refereed: Yes
Keywords: Ethical investments, Ethical screening, Fund performance, Islamic equity funds
DOI: 10.1007/s10551-014-2529-5
ISSN: 0167-4544
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2015 Springer Science+Business Media Dordrecht
Deposited On: 17 Feb 2015 22:29
Last Modified: 18 Feb 2015 22:46

Export: EndNote | Dublin Core | BibTeX

Repository Staff Only: item control page