Purpose -One of the implications of Islamic investment principles is the availability of Islamic financial instruments in the financial market. The main aim of this research is to observe the differences in terms of performance between Islamic and conventional mutual fund in the context of Malaysian capital market. Design/methodology/approach -To achieve the major objectives of this paper standard methods wereused for evaluating the mutual funds performance, for example, Sharpe index and adjusted Sharpe index, Jensen Alpha, Timing and selectivity ability. The scope of the paper is to measure the relative quantitative performance of funds which was managed based on two different approaches. Findings -The basic finding of the paper is that Islamic funds performed better than the conventional funds during bearish economic trends while, conventional funds showed better performance than Islamic funds during bullish economic conditions. In addition to that finding, both conventional and Islamic funds were unable to achieve at least 50 per cent market diversification levels, though conventional funds are found to have a marginally better diversification level than the Islamic funds. The results also suggest that fund managers are unable to correctly identify good bargain stocks and to forecast the price movements of the general market.Research limitations/implications -The main limitation is that the samples of conventional and Islamic mutual funds were from one developing market. The findings could be better validated if the sample included the mutual funds from other developed and developing economies, where both Islamic and conventional funds are available. Practical implications -The findings suggest that having Islamic mutual funds in an investment portfolio helps to hedge the downside risk in an adverse economic situation. Originality/value -So far there is no published evidence on the relative performance of Islamic and conventional mutual funds in Malaysia as well as other developing countries. Therefore, this paper adds new knowledge to the mutual funds literature.
Purpose: This paper aims to investigate the differences in mean cost, revenue and profit efficiency scores of conventional versus Islamic banks. It also aims to examine the effect of size and age on cost, revenue and profit efficiency of the sampled banks.Design/methodology/approach: This study evaluates a cross-country level data compiled from the financial statements of 40 banks in 11 Organisation of Islamic Conference (OIC) countries over the period 1990-2005. The data were collected for each year available from the BankScope database. The DEA nonparametric efficiency approach originally developed by Farrell was applied to analyse the data.Findings: The findings suggest no significant differences between the overall efficiency of conventional and Islamic banks. However, it was noted that, on average, banks are more efficient in using their resources compared to their ability to generate revenues and profits. The average bank lost an opportunity to receive 27.9 percent more revenue, given the same amount of resources. Similarly, the average bank lost the opportunity to make 20.9 percent more profits utilising the same level of inputs. Clearly there is substantial room for improvement in cost minimisation and revenue and profit maximisation in both banking systems. The size and age factor did not significantly influence the efficiency scores in both banking streams.Originality/value: This research is substantially different from the prior work in this area in three main ways. First, it investigates cost, revenue, and profit efficiency, whereas previous studies focus on cost, profit, or cost and profit efficiency. Also, no previous studies have compared conventional and Islamic banks. Second, this study distinguishes differences among big versus small, and old versus new banks, which allows more detailed insights on the efficiency issue. Third, the age issue in Islamic banks has been addressed, so far undocumented.
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