Are exchange-traded funds effective instruments to invest in Islamic markets? Early evidence from Dow Jones DJIM Turkey ETF
by Onur Gozbasi, Ekrem Erdem
American J. of Finance and Accounting (AJFA), Vol. 2, No. 2, 2010

Abstract: The purpose of this study is to evaluate the performance and pricing efficiency of the Dow Jones DJIM Turkey Exchange Traded Fund (DJIMTR), the world's first exchange-traded fund launched to track an Islamic market index. Using the daily data set, it is found that relative to its traditional index fund counterpart, DJIMTR tracks the benchmark index with a lower tracking error; thus reflecting the performance of the benchmark index more effectively. Our performance proxies, mean returns and risk adjusted returns, also demonstrate that DJIMTR outperforms its traditional index fund counterpart. In addition, as a result of various tests performed through VAR models, it is found that pricing deviation in the DJIMTR is of a temporary nature, meaning that 'the DJIMTR is efficiently priced'. In the regression model, the significant factors that explain transient premiums' size are identified as transaction cost, trading volume, intraday volatility and institutional ownership ratio. The results of the study are expected to provide new insights for founders who are planning to create mutual funds to track Islamic market indexes and to guide individual investors targeting Islamic indexes in their investment decisions.

Online publication date: Mon, 22-Nov-2010

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the American J. of Finance and Accounting (AJFA):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com