Comparison of Islamic and Conventional Equity Mutual Funds Returns Evidence from Pakistan

Abstract

The objective of the study is to examine the empirical evidence on returns of shariah compliant and conventional mutual funds returns and evaluating the deviation of returns from its mean for a period of ten years from 2009 to 2018.lnflation, interest rate and their respective indices are considered as independent variable to see the comparison 8 conventional and 8 Islamic funds that are considered from 21 asset management companies all over Pakistan. On the evaluation of results and evidences found, conventional funds shows more mean returns and less deviation from mean as compare to shariah compliant funds. Islamic mutual funds show high risk and fewer returns in comparison to their peer funds in conventional form. One aspect of the study also examines the impact of inflation on conventional funds but especially in shariah compliant funds as there scrutiny process suggested that mostly funds are based on asset backed investment so apparently inflation expected to assume a positive impact on shariah compliant funds which turns to more positive returns in high inflation times. Also religious beliefs act contrary to interest that is prohibited in shariah so examining the impact of interest on shariah funds and conventional was also one of the prime objectives that concluded to be negative after evaluation of results.