Ainulashikin Marzuki

Comparative performance-related fund flows for Malaysian Islamic and conventional equity funds

Purpose - – The purpose of this paper is to compare the fund flow – performance relationship for Islamic and conventional equity funds in Malaysia. Design/methodology/approach - – The authors use panel regression models to estimate the relationship between fund flows and performance for Islamic and conventional equity funds in Malaysia from 2001 to 2009. The data for each fund include fund flows, assets under management, management expenses, fund age, portfolio turnover, fund risk and return and the number of funds in the fund’s family. The authors also include market returns and year effects. The sample consists of 127 Malaysian equity funds with at least 65 per cent domestic equity holdings comprising 35 Islamic and 92 conventional equity funds. Findings - – Islamic fund investors respond to performance in much the same way as conventional fund investors, increasing fund flows to better performing funds and decreasing fund flows to poorer performing funds. However, there is also evidence that Islamic fund investors are relatively less responsive toward poorly performing Islamic funds, suggesting an asymmetry in the expected positive fund flow – performance relationship, but only for Islamic fund investors. When choosing funds based on other fund attributes, Islamic fund investors again exhibit similar behaviour, and like conventional fund investors direct larger percentage fund flows into smaller funds as well as funds with larger past fund flows and higher expense ratios. Research limitations/implications - – The authors were only able to access data on annual net fund flows not quarterly or monthly fund inflows and outflows as usual in developed markets and this may obscure some important aspects of investor decision-making. There is also insufficient data for matched-sample techniques, which may better control for fund-specific characteristics. Practical implications - – Islamic funds like conventional funds will experience increased fund flows with better performance and vice versa. However, Islamic fund investors appear somewhat less likely to remove monies from poorly performing funds. The authors believe this is because investors either place a premium on the non-return attributes of Shariah-compliant funds and/or wish to avoid search costs in finding another suitable Islamic fund. Apart from this, Islamic and conventional fund investors behave in a similar manner, and the authors believe that this is possible in Malaysia given the size and diversity of its Islamic fund sector. Originality/value - – This paper is one of the very few empirical studies concerning the behaviour of Islamic investors, particularly in Malaysia, primarily because of limitations in data availability.

An unobserved component analysis of Malaysia’s house prices

Purpose This paper aims to investigate Malaysia’s house prices behaviour by decomposing trend, cycle and stochastic component. Design/methodology/approach The authors perform an unobserved component model of a structural time series and Markov switching model that covers the period 1999Q1 to 2015Q4. Findings The results reveal that the variation in house price in Malaysia is best explained by its trend level, with a small role played by the cycle component; this implies the potential for gaining returns on investments in property by investors and households. The results also show that Malaysia’s HPI cycle is between 8 and 17 years which, in relative terms, is twice the length of the growth cycle and the business cycle in the economy. Meanwhile, the overall movement of HPI is forecast to have a marginal price increase up to 2028Q2. Originality/value As house prices remained elevated during the year, the house price dynamic is pivotal for understanding the source of changes in house price. With major findings centred on the relationship between house prices and macroeconomic as well as policy variables, little attention has been paid to composing the trend, cycle and seasonal pattern from the house price index, thus understanding the behaviour of house prices’ unobserved components.

A comparative analysis of the smart money effect in Malaysian Islamic and conventional equity funds

ABSTRACT This paper undertakes a comparative analysis of the ‘smart money’ effect—whereby investors are able to identify funds that subsequently perform well—among Malaysian Islamic and conventional domestic equity funds. We find that Islamic equity fund investors are unable to identify funds that will outperform benchmarks in the future. However, these same investors have some ability in identifying poorly performing funds. The key implications are as follows. First, Islamic equity investors naively chasing recently highly performing funds only incidentally benefit from mutual fund momentum strategies. Second, fund managers may be able to benefit from a contrary ‘dumb money’ effect found among Islamic equity fund investors in that they appear most concerned with only very poor performance in determining the flow of funds. Finally, we find high search costs may be one reason why investors naively chase past better performing funds.