This paper investigates the investment performance of Malaysian Islamic equity funds anda matching sample of conventional equity funds relative to their market benchmark. An integratedmodel is used to simultaneously capture the market timing and selectivity skills of fund managers.Our findings indicate that the Islamic funds do not match the performance of the conventionalfunds in terms of selectivity skill. However, Islamic funds perform no worse than their conventionalcounterparts in market timing, although neither outperform the market. These findings have crucialimplicationsnotonlyforfundmanagers’investmentdecisions,butalsoforsensitiveshariah-compliantinvestors and risk-seeking investors of Islamic equity funds in their investment portfolio preference.
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