Stock Picking and Market Timing of the Egyptian Fund Managers: Evidence from the Financial Crisis

PurposeThis paper aims to explore the impact of the COVID-19 pandemic on the market timing skills of Islamic equity funds in Asia, Europe and North America.Design/methodology/approachThe authors employed a two-step process. First, a Granger causality test is applied to test the bivariate relationship between Islamic fund indices and stock market ones by highlighting the impact of the COVID-19 pandemic. Second, the methodology of Treynor and Mazuy (1966) is deployed to account for the market timing abilities skills of Islamic fund managers during the pandemic period.FindingsThe investigation revealed mixed results. The European Islamic funds were positively impacted by the stock market as well as by the COVID-19 pandemic context. Additionally, compared to their Asian and North American peers, only European Islamic fund managers have the ability to time the market during the health crisis period.Research limitations/implicationsDespite its contribution to the Islamic finance literature, this study has some flaws. Indeed, the selected sample of three regions, namely Asia, Europe and North America, precludes extrapolating these conclusions. Other regions should be investigated to further our understanding of Islamic equity funds. Furthermore, due to data availability and accessibility, the study period was limited to a specific time of the COVID-19 pandemic. This shortcoming can be addressed through a multiwave investigation, especially since each region was exposed differently to the pandemic.Practical implicationsThe paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic fund managers across the three regions would serve as a guide to identifying the most suitable internationally focused investment strategy.Social implicationsThe paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic funds managers across the three regions would serve as a guide to identify the most suitable internationally focused investment strategy.Originality/valueThe originality of this investigation is that it is the first to examine Islamic equity fund managers and their skills to time the stock markets during the COVID-19 pandemic period in Asia, Europe and North America. The current paper extends the Islamic finance literature.

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Do Portuguese mutual funds display forecasting skills?

Neto

Lobão²,

Vieira³

2017

SEF

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The completion of this dissertation ends an important chapter of my academic path. However, I wouldn't have been able to accomplish it without the input and contribution of several people to which I would like to express some words of gratitude. Firstly, I would like to express my sincerest gratitude to my supervisor, Professor Júlio Lobão. Initially, for his help and enthusiasm in defining the object of study and, foremost, for the vital support, recommendations and guidance to enhance the dissertation. I also would like to thank Mr. Sérgio Brito from APFIPP for the prompt availability to provide indispensable data for the empirical research. I thank my friends Abel and Pedro, for sharing their experiences, their valuable insight and constant support. Last but not least, I would like to specially thank my parents, brother and grandmother for their unconditional support and encouragement throughout my research. A special thanks to my fiancé for her daily support, patience and love.

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Stock Picking and Market Timing of the Egyptian Fund Managers: Evidence from the Financial Crisis

Cited by 5 publications

References 31 publications

Market-Timing Skills in the Aftermath of COVID-19 Outbreak: Evidence from Islamic Funds

Market-Timing Skills in the Aftermath of COVID-19 Outbreak: Evidence from Islamic Funds

Islamic equity funds and stock market: dynamic relation and market timing during the COVID-19 outbreak

Do Portuguese mutual funds display forecasting skills?

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