Intertemporal test of beta stationarity performance of Islamic sector structured mutual funds

The purpose of this research paper is to examine social Islamic mutual funds' financial performance. Since Islamic mutual funds have only been around for the past two decades, most of the research on this topic is fairly new. In this study, we apply the single factor model of Schwert and Seguin (1990) to a sample of Islamic mutual funds. Several studies have investigated the characteristics of individual Islamic mutual funds. Using the S&P500 and the FTSE Global Islamic indices on sector structured Islamic mutual funds, our results suggest that the volatility of the market and that of the Islamic mutual funds portfolio behave in a different manner with inter and intra market proxies. The volatility persistence of each Islamic mutual fund portfolio and its systematic risk are significantly related. The systematic risks of different portfolios tend to move in a different direction during periods of increased market volatility. We gain an insight into the return dynamics and the process in which Islamic mutual funds prices are determined.