LUCRATIVENESS OF ISLAMIC VS CONVENTIONAL MUTUAL FUNDS IN PAKISTAN

The purpose of this study is to conduct a comparative riskadjusted performance, selectivity skills and market timing abilitiesanalysis of Islamic and Conventional mutual funds in Pakistan. Thestudy utilizes various risk-adjusted performance measures to evaluaterisk and return characteristics. The study also used techniqueproposed by (Treynor and Mazuy 1966) and (Henriksson and Merton1981) to appraise selectivity skills and timing abilities on the dataset ranging 2009-2013 of Islamic and Conventional mutual funds. Inthis study, four categories Aggressive Fixed Income, Asset Allocation,Equity and Balanced open end mutual funds are analysed. On thebasis of evidences found, only few mutual fund managers from Islamicand Conventional mutual funds hold better stock picking skills. Themutual fund managers of both Islamic and conventional mutual fundsare found to be a poor market timer in Pakistan. Islamic mutualfunds have earned better returns than conventional mutual funds.Therefore, risk adjusted performance of Islamic mutual funds is betterthan conventional mutual funds