The resilience of Islamic Equity Funds during COVID-19: Evidence from risk adjusted performance, investment styles and volatility timing

This paper analyses the risk-adjusted performance of Islamic and conventional equity funds during the COVID-19 pandemic. We show that Islamic equity funds demonstrated differentials in risk-adjusted performance, investment styles, and volatility timing compared to their conventional counterparts. Specifically, the results revealed that Islamic equity funds are more resilient to COVID-19 shock since they outperformed non-Islamic peers during the peak months of the pandemic. The trend continues even when the spread smoothens. These findings confirm the safe-haven properties of Islamic equity funds, which is helpful for investors aiming to hedge pandemic risks. The style analysis reveals investment drift from riskier styles to more prudent options in response to each stage's uncertainties. The results suggest policymakers should further investigate Islamic financial assets and their underlying principles to improve the resilience of economic systems in any future black swan events.

Islamic Equity Funds, Resilience, Style Analysis, Volatility timing, covid-19

10.1016/j.iref.2021.09.019

1059-0560

276-295

Yarovaya, Larisa

2bd189e8-3bad-48b0-9d09-5d96a4132889

Mirza, Nawazish

9c037ffb-1791-4e76-bae6-9fb0addd0c70

Rizvi, Syed Kumail Abbas

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Saba, Irum

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Naqvi, Bushra

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January 2022

Yarovaya, Larisa

2bd189e8-3bad-48b0-9d09-5d96a4132889

Mirza, Nawazish

9c037ffb-1791-4e76-bae6-9fb0addd0c70

Rizvi, Syed Kumail Abbas

8b73e18a-dbaf-40ab-a1da-304d3849442c

Saba, Irum

eea07428-cc82-428e-bb85-65d83e6e0df9

Naqvi, Bushra

0e7fba1a-4119-499a-b5ad-d700831c0868

Yarovaya, Larisa, Mirza, Nawazish, Rizvi, Syed Kumail Abbas, Saba, Irum and Naqvi, Bushra (2022) The resilience of Islamic Equity Funds during COVID-19: Evidence from risk adjusted performance, investment styles and volatility timing. International Review of Economics and Finance, 77, 276-295. (doi:10.1016/j.iref.2021.09.019).

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Accepted/In Press date: 27 September 2021

e-pub ahead of print date: 4 October 2021

Published date: January 2022

Additional Information: Funding Information: Rita Ribeiro is a student of the Ph.D. Program in Pharmaceutical Sciences from the Faculty of Pharmacy, University of Coimbra, and a recipient of the fellowship SFRH/BD/ 121935/2016 from the Portuguese Foundation for Science and Technology. This work was funded by Portuguese National funds via FCT ? Funda??o para a Ci?ncia e a Tecnologia, I.P. ? under projects Cancel Stem (reference POCI-01-0145-FEDER-016390), CENTRO-01-0145-FEDER-000012 (HealthyAging2020), Euronanomed2 (FCT reference ENMed/0005/2015), and CNC. IBILI (FCT reference UID/NEU/04539/2019). Funding Information: Acknowledgments Rita Ribeiro is a student of the Ph.D. Program in Pharmaceutical Sciences from the Faculty of Pharmacy, University of Coimbra, and a recipient of the fellowship SFRH/BD/ 121935/2016 from the Portuguese Foundation for Science and Technology. This work was funded by Portuguese National funds via FCT – Fundação para a Ciência e a Tecnologia, I.P. – under projects Cancel Stem (reference POCI-01-0145-FEDER-016390), CENTRO-01-0145-FEDER-000012 (HealthyAging2020), Euronanomed2 (FCT reference ENMed/0005/2015), and CNC. IBILI (FCT reference UID/NEU/04539/2019). Publisher Copyright: © 2021 Elsevier Inc.

Keywords: Islamic Equity Funds, Resilience, Style Analysis, Volatility timing, covid-19