INVESTIGATING THE PERFORMANCE OF ISLAMIC MUTUAL FUNDS: EVIDENCE FROM AN EMERGING ECONOMY

Abstract

The objective of the paper is to study the performance of Islamic mutual funds by
comparing their volatility with KSE-30 index of Pakistan Stock Exchange. For
empirical analysis and to study the volatility behavior of KMI-30 index and KSE-30
indexed mutual funds ARCH/GARCH models are used. Factors that are considered for
comparison of performance include Return, Volatility, Net Asset Value (NAV), KMI-30
Index and KSE-30 Index. Our results show that returns and volatility of Islamic mutual
funds are consistent with the performance of conventional mutual funds. Furthermore
our investigation shows that the volatility of Islamic mutual funds plays a little role in
determining their performance, however opposite is true for conventional mutual funds.
This study is important for investors in Pakistan because it can help them to diversify
their investment by selecting suitable portfolios.