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

The resilience of Islamic Equity Funds during COVID-19: Evidence from risk adjusted performance, investment styles and volatility timing
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
1059-0560
276-295
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
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 (2021) 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).

Record type: Article

Abstract

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.

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More information

Accepted/In Press date: 27 September 2021
e-pub ahead of print date: 4 October 2021
Keywords: Islamic Equity Funds, Resilience, Style Analysis, Volatility timing, covid-19

Identifiers

Local EPrints ID: 451851
URI: http://eprints.soton.ac.uk/id/eprint/451851
ISSN: 1059-0560
PURE UUID: 2621af89-6988-4d9e-a8c3-9342afc22ea3
ORCID for Larisa Yarovaya: ORCID iD orcid.org/0000-0002-9638-2917

Catalogue record

Date deposited: 01 Nov 2021 17:31
Last modified: 28 Apr 2022 02:26

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Contributors

Author: Larisa Yarovaya ORCID iD
Author: Nawazish Mirza
Author: Syed Kumail Abbas Rizvi
Author: Irum Saba
Author: Bushra Naqvi

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