Employee Provident Funds’ Market Performance: The Case of Malaysia

The ability to time the market and having superior asset selection capabilities indicate violation of efficient market theory. Past studies tested Treynor-Mazuy model to investigate performance of mutual fund managers. This current study has employed similar concepts to measure performance of the Malaysian employee provident fund (EPF). The study has considered Malaysian EPFs over a period 1986–2016 using yearly dividends of EPF, Malaysia market index (KLCI) and Malaysia government bond, as a proxy for the risk-free rate. Treynor and Mazuy model was employed alongside ARDL to get estimates for timing, selectivity and performance indicators. Results indicate that Malaysian pension funds outperform the market index but with a weak market timing ability. The results also indicate that market index does not influence EPF returns. As Malaysian EPF is now Shari’ah compliant, the findings will carry significant policy implications for Muslim investors, fund managers in other Islamic markets and regulators of Shari’ah-compliant fund markets.