Performance measurement of Islamic mutual funds using DEA method

Purpose The purpose of this study is to update the investment literature by providing latest evidence of performance of Islamic mutual funds by using global sample mutual funds data to support with empirical facts. Design/methodology/approach This study analyzes the comparative performance of Islamic and conventional mutual funds by using capital asset pricing model, Fama & French’s three-factor model and Carhart’s four-factor model. Further, the study tested the coskenwness effect by using data envelopment analysis approach. Findings The authors find evidence that when size of the funds is controlled, Islamic investment underperform the conventional mutual funds in four out of six models. The size of underperformance varies from model to model: from 32 basis points in the Carhart’s four-factor model with the skewness factor to two basis points at the Fama and French’s three-factor model. Also the study finds that alpha(s) are only insignificant for conventional mutual funds when the skewness factor is included in the regression. While comparing the loading on Islamic mutual funds, results show that Islamic mutual funds are less risky than conventional mutual funds when they are controlled for skewness. Originality/value This study uses the different factor models of performance evolution which help in overcoming weakness of measuring the Islamic mutual funds’ performance.

Growth Options and Related Stock Market Anomalies: Profitability, Distress, Lotteryness, and Volatility

We provide new evidence on the economic role of growth options behind the profitability, distress, lotteryness, and volatility anomalies. We use idiosyncratic skewness to measure growth options and estimate expected idiosyncratic skewness capturing investors’ expectations about the firm’s mix of growth options versus assets-in-place. We find that investors require a positive premium to hold stocks of inflexible firms with low growth options and negative expected skewness and that a newly proposed skewness factor based on growth options explains the aforementioned anomalies. Thus, the new measure of expected idiosyncratic skewness may serve to reduce the number of anomalies in the literature.

Heterogeneous Beliefs and Risk-Neutral Skewness

This study tests whether belief differences affect the cross-sectional variation of risk-neutral skewness using data on firm-level stock options traded on the Chicago Board Options Exchange from 2003 to 2006. We find that stocks with greater belief differences have more negative skews, even after controlling for systematic risk and other firm-level variables known to affect skewness. Factor analysis identifies latent variables linked to risk and belief differences. The belief factor explains more variation in the risk-neutral skewness than the risk-based factor. Our results suggest that belief differences may be one of the unexplained firm-specific components affecting skewness.

Turbulent Flow Through Spacer Grids in Rod Bundles

The effects of the spacer grids with mixing vanes in rod bundles on the turbulent structure were investigated experimentally. The detailed hydraulic characteristics in subchannels of a 5 × 5 rod bundle with mixing spacer grids were measured upstream and downstream of the spacer grid by using a one component LDV (Laser Doppler Velocimetry). Axial velocity and turbulent intensity, skewness factor, and flatness factor were measured. The turbulence decay behind spacer grids was obtained from measured data. The trend of turbulence decay behaves in a similar way as turbulent flow through mesh grids or screens. Pressure drop measurements were also performed to evaluate the loss coefficient for the spacer grid and the friction factor for a rod bundle.

Joint statistics of a passive scalar and its dissipation in turbulent flows

The statistical relationship between a passive scalar and its dissipation is important for both a basic understanding of turbulence small-scale properties and for various aspects of turbulent combustion modelling. This problem is studied in two different flows through spectral analysis as well as probability density functions using temperature as a passive scalar. Particular attention is paid to the experimental determination of the three squared derivatives involved in the temperature dissipation. As a first step, it is found that basic properties such as the correlation coefficient between temperature and its dissipation are strongly related to the asymmetry of the scalar fluctuations, so that the usually assumed statistical independence between these variables is not justified. These trends are the same for the two flows investigated here, a boundary layer and a jet. This connection appears to be related to fluctuations of small amplitude for both quantities which are associated with relatively low frequencies lying between the integral scale and the Taylor microscale. In regions where the temperature skewness factor is nearly zero, the correlation coefficient is also very small, and several tests show that the assumption of independence is then fully justified. Thus, the main parameter influencing joint statistics of temperature and its dissipation is the asymmetric feature of temperature fluctuations, but the asymmetry of the longitudinal temperature derivative, which results from the flow boundary conditions and is usually felt through the presence of the so-called temperature ramps, is also involved. Even though the magnitude of the derivative skewness factor is almost uniformly distributed in both flows, the secondary effect becomes the dominant one in flow regions where the influence of the temperature asymmetry is relatively weak.

Numerical calculation of decaying isotropic turbulence using the LET theory

The local-energy-transfer (LET) theory (McComb 1978) was used to calculate freely decaying turbulence for four different initial spectra at low-to-moderate values of microscale Reynolds numbers (Rλ up to about 40). The results for energy, dissipation and energy-transfer spectra and for skewness factor all agreed quite closely with the predictions of the well-known direct-interaction approximation (DIA: Kraichnan 1964). However, LET gave higher values of energy transfer and of evolved skewness factor than DIA. This may be related to the fact that LET yields the k−5/3 law for the energy spectrum at infinite Reynolds number.The LET equations were then integrated numerically for decaying isotropic turbulence at high Reynolds number. Values were obtained for the wavenumber spectra of energy, dissipation rate and inertial-transfer rate, along with the associated integral parameters, at an evolved microscale Reynolds number Rλ of 533. The predictions of LET agreed well with experimental results and with the Lagrangian-history theories (Herring & Kraichnan 1979). In particular, the purely Eulerian LET theory was found to agree rather closely with the strain-based Lagrangian-history approximation; and further comparisons suggested that this agreement extended to low Reynolds numbers as well.