Prediction Model for the Persistence of Sharia Mutual Fund Performance in Indonesian Capital Market

Authors

  • Zaenal Arifin Universitas Islam Indonesia
  • Sri Mulyati Universitas Islam Indonesia

DOI:

https://doi.org/10.33736/ijbs.3309.2020

Keywords:

Sharia Mutual Fund, Performance, Persistence, Predictive Model of Persistence

Abstract

Over the period of 2010 to 2012, the performance of Islamic mutual funds in Indonesia saw a high degree of persistence. However, the persistence rate decreased in the period of 2014 to 2016. Given such fluctuated rate, this research tries to identify the factors that influence the persistence of the mutual fund performance and, based on these factors, creates the predictive modelling of persistence rate. The samples of the study included all sharia mutual funds offered from 2010 to 2016 in Indonesian capital market. To construct the model, we used the Logit equation, while to evaluate the accuracy of the prediction model, we used the Expectation- Prediction Evaluation with a prediction evaluation for success of 0.5. The results of this study indicate that,
of the whole mutual fund, the best model is a model involving the following variables: (1) the time interval since the mutual fund was launched, (2) the rank of the mutual funds, whether it was at the top 5 within 1-2 years after the launch, and (3) the number of newcomer funds during persistence testing. The level of accuracy of this model, when it was used to predict the whole sharia mutual fund persistence, was 64%. When the model was used to predict the persistence of equity performance of mutual fund, its level of accuracy rose to 77.78%. Whereas in the use to predict the persistence of fixed income mutual funds the accuracy rate amounted to 70%. The persistence of predictive model for mixed funds was based on different factors of compositions: (1) the number of funds under management, (2) the fact whether the mutual funds are in the top 5 within 1-2 years after the launch, and (3) the number of newly coming funds during persistence testing. This model had an accuracy level of 75%. It is expected that this study be used as a guide for investors wishing to invest in sharia mutual funds.

References

Abderrezak, F. (2008). The Performance of Islamic Equity Funds: A Comparison to Conventional, Islamic and Ethical Benchmarks. Thesis, University of Maastricht, Netherlands.

Altman, E. I. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589–609.

Arifin, Z., & Mulyati, S. (2017). Relative Short-Term Persistence and Absolute Short-Term Persistence of Islamic Mutual Funds in Indonesia. Advances in Economics, Business and Management Research (AEBMR), 35, 94-100.

Arifin, Z. (2018). Testing for Persistence in Sharia Mutual Fund Performance in Indonesia, Review of Integrative Business and Economics Research, 7(1), 104-115.

Bodie, Z., Kane, A., & Marcus, A. J. (2009). Investment. New York: McGraw-Hill Irwin.

Carhart, M. M. (1997). On Persistence in Mutual Fund Performance, The Journal of Finance, 52(1), 57-82.

Dabbeeru, R. N. (2006). Performance Analysis of Mutual Funds in Saudi Arabia. SSRN eLibrary. doi: http://dx.doi.org/10.2139/ssrn.921523

Dwianggoro, A., Anantadjaya, S. P. & Sibarani, M. (2012). Equity Mutual Funds in Indonesia: Persistence Analysis Period April 2006 - March 2011. Finance & Accounting Journal, 1(2), 69-83.

Elfakhani, S., Hassan, M. K., & Sidani, Y. (2005). Comparative Performance of Islamic Versus Secular Mutual Funds, Proceeding of Economic Research Forum Conference 2005, Cairo: Egypt

Elvani, V., & Linawati, N. (2013). Consistency Test of Stock Fund Performance in Indonesia Stock Exchange Period 2008-2012, FINESTA, 1(2), 130-135.

Grinblatt M., & Titman, S. (1992). The Persistence of Mutual Fund Performance, The Journal of Finance, 67(5), 1977-1984.

Gruber, J. M. (1996), Another Puzzle: The Growth in Actively Managed Mutual Fund. The Journal of Finance, 51(3), 783-810.

Hayat, R., & Kraeussl, R. (2012). Risk and Return Characteristics of Islamic Equity Funds. Emerging Market Review, 12(2), 189-203.

Jones, S., Laan, S. van der., Frost, G., & Loftus, J. (2008). The Investment Performance of Socially Responsible Investment Funds in Australia. Journal of Business Ethics, 80, 181-203.

Khamlichi, A., Arouri, M., & Teulon, F. (2014). Persistence of Performance Using The Four-Factor Pricing Model: Evidence from Dow Jones Islamic Index. The Journal of Applied Business Research, 30(3), 917- 926.

Mansor, F., & Bhatti, M. I. (2011, March 14-16). The Islamic Mutual Fund Performance: New Evidence on Market Timing and Stock Selectivity, Proceeding 2011 International Conference on Economics and Finance Research (ICEFR), Langkawi, Malaysia.

Norman, L Trevor, (2004). Islamic Investment Funds, in Sahail Jaffer (Editor), Islamic Asset Management, Euromoney Book- Kuwait Finance House- The National Commercial Bank, London, United Kingdom

Rahman, A. (2013). Comparative Analysis of Shari'a Mutual Fund Performance and Conventional Mutual Funds in Crisis Period and Subsequent Crisis Subprime Mortgage, Master Thesis, Universitas Gadjah Mada, Indonesia.

Romadon, G. (2012). Comparative Analysis of Sharia and Conventional Mutual Performance Using RMAR and RDIV, Master Thesis, Universitas Gadjah Mada, Indonesia.

Rubio, J. F., Hassan, M. K., & Merdad, H. J. (2012). Non-Parametric Performance Measurement of International and Islamic Mutual Funds. Accounting Research Journal, 25(3), 208-226.

Susanto, H. A. (2012). Comparative Analysis of Conventional Mutual Fund Performance and Syariah Mutual Funds Using Sharpe Model, Treynor, Reward to Market Risk, and Reward to Diversification, Master Thesis, Universitas Gadjah Mada, Indonesia.

Zheng, L. (1999). Is Money Smart? A Study of Mutual Fund Investor's Fund Selection Ability. The Journal of Finance, 54(3), 901-933.

Downloads

Published

2020-12-07

How to Cite

Zaenal Arifin, & Sri Mulyati. (2020). Prediction Model for the Persistence of Sharia Mutual Fund Performance in Indonesian Capital Market. International Journal of Business and Society, 21(3), 1033–1044. https://doi.org/10.33736/ijbs.3309.2020