Academic journal article European Journal of Sustainable Development

Stock Picking and Market Timing of the Gulf Fund Managers: Evidence from the Financial Crisis

Academic journal article European Journal of Sustainable Development

Stock Picking and Market Timing of the Gulf Fund Managers: Evidence from the Financial Crisis

Article excerpt

1. Introduction

Lately, an empirical evidence ofFei et al., (2013)documents that financial markets turn to be more effective after die crisis period; it considers a precious opportunity of a better external environment by easing the nerves of die recipient country's government. The investment strategies will be more positive, diversified and complementary to die own real economy. But does this in turn means a better skills and dien performance for die fund managers across the same periods? A recent stream of the literature investigates die above-mentioned relationship for several mutual funds across different periods of financial turbulent, while die results are assorted. Even in die emerging economics diat experienced huge private capital inflows in die wake of die emerging markets crisis in die 1990s, and prior to die global FC of 2007-2008 (Christian, 2011), and which are supposed to provide a prime opportunity for larger profits comparing to diese of the developed ones (Francis, 2012), die results are conflicting. Where, in most mature, premature, and emerging market places; relying on different periods of time, samples sizes, benchmarks, and evaluating measures,some academics find no evidence on the managers' skills of market timing and selectivity; (see e.g.Kaushik & Pennathur, 2012, and Yang-pin et ab, 2012), against some odier ones who documents diat die funds do out-perform the intended index even after adjusting for the risk(see e.g.Hubner et ak, 2012; Beehary et ak, 2009).To this end of overlapping diis study offers new empirical evidence from five Gulf countries 'Kuwait, United Arab Emirates, Kingdom of Bahrain, Sultanate of Oman, and State of Qatar' as an example from Islamic emerging economies by answering the following research questions: Do die Gulf fund managers have die skills of security selection and market timing during and after die crisis period? Are diere any significant differences between die performance of equity CMFs and dieir Islamic counterparts? Actually, littiescholars in die area ofmutual fundshas devoted his investigations towards die Middle East, where the markets are less saturated and more accepting for new brands, (Marketing Week, 2012). Hence, it is important to extend die recent literature widi evidence from diese emerging economies and open up new horizons for die financial intermediation services. Towards this point, diis study investigates a sample of 90 diversified mutual funds selected from five Gulf countries. Meanwhile, in order to reveal die performance differences between die funds' categories, we divide die sample into two sub-groups: equity conventional and Islamic ones. Subsequently, to explore the funds' performance over the whole period, and to test die impact of the financial turmoil on the funds' access returns, it employs bodi of conventional and Islamic MSCI market indexes of diese countries across two sub- periods: 'die financial crisis period' diat covers the two years of 2007-2008 and 'die Post- Crisis period' which holds between 2009 and die mid of 2012. The reminder of diis paper is organized as follow. Section 2 presents a brief literature review. Section 3 displays die mediodology, data sources, while the empirical tests' results are presented in Section 4 and die conclusions follow in Section 5.

2. Related literature and empirical hypotheses

2.1. Conventional Mutual Funds (CMFs)'performance across the crisis period in developed and emerging economies

Over a period of 50 years, relying on various studies acrossdifferentmature,premature, and emerging economies, it seems diat die skills of die CMFs' managers are quietiy convergent across the crisis period, where Hoepner et al., (2009)indie US,Heaney et al., (2007) in Australia,Evangelos (2009) in Turkey, and Beehary et ak, (2009) in Mauritianrefer to die existence of die market timing capability between die fund managers, even if it was slightiy weak especially during die turbulent periods like this of (2007-2008), and diat diere have been considerable periods of time when die individual international funds rolling alphas suggests that the funds out-perform the intended index after adjustment for risk. …

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