Finance

ANALYSIS
NET PROFIT RATIO
The profit margin on sales ratio tells us the ability of the firm to convert its sales into profits. A low profit margin on sales indicates high expenses which consume most of the revenue earned by the firm. In such a case, the firm needs to analyze and point out areas which are producing more expenses than usual. The higher the ratio, the better it is for the company. From the perspective of Electrolux there is a significant moment is reviewed in the year 2008. Electroluxs net profit margin is almost dipped downwards in the year 2008 as compare with the year 2007 because of margins in selling, administration expenses, RD expenditure, etc. In that case Electrolux still has a room for improvement in the net profit margin. Moreover in the year 2008, because of rough economic and business condition, Electrolux efficient business running strategy hit badly in terms of net profit margin. It is viewed that Net Profit margin rate will increase in years to come. The management strategy has helped generate more revenue but there has been significant impact made on the net profit Myers, Brealey and Marcus (2001).

PRICE EARNING RATIO

The price earning ratio is a very important ratio for the investors in the stock market. The ratio helps the potential investor compare the stock with other similar stocks in the market. The lower the ratio, the better it is. In an ideal situation, all the stocks in the stock market should have similar price earning ratios, otherwise there would be profit earning opportunities on the shares. If the value for this ratio is low, it means that the investor needs to invest less money to get the earning Besley, Brigham, Scott, Eugene F. (2001). The price earning ratio of Electrolux in the year 2008 as compare with the year 2007 tells us that the stock is low priced in the year 2008 because of volatile and fragile business condition. Moreover, Electrolux pricecash flow ratio in the year 2008 gives us an idea that the ratio is slightly low as compare with the industry trends and suggest that the companys growth perspective are below average.

DEBT GEARING RATIO
Dependency on debt financing is not a bad habit but it has consequences if you rely on more. In the year 2008, Electrolux debt gearing ratio is on the higher in comparison with the year 2007 primarily due to the factors of business volume, increment in sales, fulfillment to pay the suppliers and acquisitions of fixed asset. Due to the expansion in business, Electrolux has plenty of financial obligations, most of which has been acquired through debt. In 2008, Marks and Spencer reliance more on debt financing as compare to the year 2007.

CURRENT RATIO
The current ratio tells us about the liquidity of the company. It is the ratio which tells us the companys ability to pay off its liabilities using the current assets in case the company is liquidated. Higher the current ratio, the better it is. Electrolux current ratio is slightly on a higher side year by year from the year 2008 in comparison with the year 2007. This ratio indicates a higher margin of safety with respect to meeting current obligations. Electroluxs current ratio will allow them to take more debt as compared to previous years practices. Although, Electrolux has made short-term investments due to which the current ratio is reported on the higher side and looks stable and healthy as compared to the previous years Besley, Brigham, Scott, Eugene F. (2001). Electrolux current ratio has strong current ratio and its gives a strong and positive signal to the creditors that companys business operation is running on a right path. The current ratio of Electrolux suggests that company have sufficient and ample reserve cash or liquid asset and Electrolux can utilize the excess or reserve cash on their ongoing business.
RETURN ON EQUITY (ROE)

An ROE of 2.23 and 18.24 (Annual Report, 2008) in the year 2008 and 2007 respectively indicates that Electrolux is less dependent on equity financing and company is heavily relying on debt financing. The Electroluxs return on equity (ROE) in the year 2008 and 2007 reported volatile growth rates in because of Electroluxs internal policies or due to macro factors. Companys inconsistent performance in the shape of net profit year by year not make a significant impact on the ROE of the company in contrast with the industry as we know that the stockholder equity, which includes retained earnings, also makes a reflection on the companys stock prices.

SHARE PRICE FLUCTUATIONS
The closing stock price of Electrolux in the year 2008 and 2007 is SEK 66.75 and SEK 108.50 Electrolux Share Price (2008).If I am the broker I would prefer to hold rather than sold because on some grounds which is stated below

Not out of the woods but small improvements in sales and margins and return to basics could translate into more upside.

In the year 2008 companys earning is on the lower side as compare with the year 2007. So, it is very evident fact that Electroluxs performance and its earnings have decreased but there are some indications that earnings will grow in years to come. Moreover, lower net earnings subsequently had a significant impact on its stock price. In addition, this little increment in net earnings will make a strong reflection in the years to come and also this has had a positive influence on the investor, as the company has managed to keep its returns higher than that of the entire sector.

If I am the investor, I would invest the company, because I belief the company will actually deliver on recent proposals and meet current consensus forecasts. Also because the companys recent market analysis shows that the companys stock has been trading at a higher price than the entire sector.

CONCLUSION
Although Electrolux portrays a very strong and positive position in the markets place and without doubt this company has an ability to challenge its rivals to have a girds to become the market leader in the near future. There are certain areas where Electrolux should pay attention to like in the area of stock prices, debt management, net profit margin, etc on consistent basis and assist in increase its investors confidence towards the organization. Moreover, extra efforts need to be concentrated towards improving the product quality which really helps in uplifting the sales. Also company formulates the strategy to overcome the macro factors like economic recession etc that really troubles the companys future.

APL is a company that is in the oil industry that deals with crude oil which is contemplating of increasing its capacity but it is faced with three alternatives, alternative A, B, and C. The company is faced with this decision of choosing the alternatives using financial analysis tools that is, NPV and annual equivalent value. From the analysis alternative B has been selected because of its contribution to the increase of the value of the business, alternative B has the lowest annual equivalent value therefore, it is accepted.

Each alternative has been evaluated quantitative, qualitative factors have not been taken into consideration.

1.1 introductions
APL has been facing a problem of lack of capacity of storage of its products as well as industrial disputes. This has reduced profitability as well as destroying the reputation of the company because customers are running away because the products are not supplied on time, being in a business of oil refinery the company requires a large storage capacity as well as a well maintained transport system which will allow customers to come in and come out of the storage facility easily. This requires a huge investment in terms of storage capacity, transport system in a form of a rail, and good administrative building. Without this the company will continue experiencing problems of storage in adequate supply to customers, cancellation of orders, and other internal disputes which may reduce shareholders wealth and incapacitate the companies operation. In order to solve this problem the company needs to evaluate three alternatives proposed by distribution department of the company.

The purpose of this case study is to discover which of the three alternatives could experience little cost in terms of net present value over a period of useful life. The intention of the investor is to put the capital on the alternative with the hope of recovering the invested money after its usefulness, if all things being equal (Mishkin, 2007).

In analyzing this case three approaches will be used. The three alternatives will be taken as mutually exclusive projects which cannot be taken at the same time. Therefore, the net present value, Internal Rate of Return and equivalent annual annuity will be the best approaches to solve the problem.

The net present value is defined as the present value of future cash flows discounted at the projects cost of capital minus the initial net cash outlay for the project. Projects with a positive NPV should be accepted negative NPV projects should be rejected. If two projects are mutually exclusive, the one with the higher NPV projects should be accepted. The cost of capital is the expected rate of return on projects of similar risk.

In mathematical terms, the formula for net present value is
NPV  I0  n Xt______
                            t1         (1  k)t
Where
I0  the initial cash investment
Xt  the net cash flow in period t
K  the project s cost of capital
N  the investment horizon
The net present value works for projects of any length. By subtracting the initial investment form the projects present value, you could calculate NPV directly, as in the following equation, where C0 denotes the initial cash outflow required to build the office block.

NPV  C0            C1    C2___    C3____
                                       1  r   (1  r)2       (1  r)3
This equivalence should be no surprise, since the present value calculation is designed to calculate the value of future cash flows to investors in the capital markets.

In that case we would discount C1 by r1, the discount rate for 1-year cash flows C2 would be discounted by r2 and so on. Here we assume that the cost of capital is the same regardless of the date of the cash flow. We do this for one reason only-simplicity. But we are in good company with only rare exceptions firms decide on an appropriate discount rate and then use it to discount rate and then use it to discount all cash flows from the project.

The first two steps in calculating NPVs forecasting the cash flows and estimating the opportunity cost of capital- are tricky, and we will have a lot more to say about them in later chapters. But once you have assembled the data, the calculation of present value and net present value should be routing. Here is another example.

Annual equivalent value (AEV) method
In a choice between machines with different lives, we assume that each machine is replaced in the last year of its life. For the purpose of analysis, the replacement chains of the machines can be assumed to extent periods of time equal to the least common multiple of he lives of the machines.

The method for handling the choice of the mutually exclusive projects with different lives can become quite cumbersome if the projects lives are very long. The problem fortunately can be handled by a simpler method. We can calculate the annual equivalent value of cash flows of each project. We shall select the project that has lower annual equivalent cost.

AEV  NPV______
Annuity factor
Internal rate of return - The Internal Rate of Return (IRR) is an indicator for the efficiency or quality of an investment, as opposed to the NPV which indicates value or magnitude.  The IRR is the annualized effective compounded return rate which can be earned on the invested capital, i.e., the  HYPERLINK httpen.wikipedia.orgwikiYield_28finance29 o Yield (finance) yield on the investment. Put another way, the internal rate of return for an investment is the discount rate that makes the net present value of the investments income stream total to zero.

A project is a good investment proposition if its IRR is greater than the rate of return that could be earned by alternate investments of equal risk. Thus, the IRR should be compared to any alternate costs of capital including an appropriate risk premium. In general, if the IRR is greater than the projects  HYPERLINK httpen.wikipedia.orgwikiCost_of_capital o Cost of capital cost of capital, or  HYPERLINK httpen.wikipedia.orgwikiHurdle_rate o Hurdle rate hurdle rate, the project will add  HYPERLINK httpen.wikipedia.orgwikiValue_28economics29 o Value (economics) value for the company.

2.11 Background and comparisons of alternatives
The company, an oil refinery company wants to expand their capacity by looking at three alternatives. Alternative one is to sell the existing equipment purchase a new land and install new storage tanks which will require a wharf a pipeline which will be constructed at the cost of
Storage tanks 1,725,000
A pipeline 40,000
A wharf 2,000,000 and new
Gantries 650,000

The second alternative for the company is to sell the existing equipment to a company and lease it back. In this case they will not construct a wharf but they will need to construct a pipeline from the new facility to the oil refinery. In this case, the company will purchase and install a new storage tanks at a cost of 1,725,000 they will also need a pipeline connecting the two places at a cost of 2,000,000 Gantries will be required and will cost 650,000.

The last alternative for the company will be to the existing facility but will be forced to construct a rail and sliding which will connect the facilities.

2.12 Internal Rate Return
The Internal Rate of Return (IRR) is an indicator for the efficiency or quality of an investment, as opposed to the NPV which indicates value or magnitude.

The IRR is the annualized effective compounded return rate which can be earned on the invested capital, i.e., the  HYPERLINK httpen.wikipedia.orgwikiYield_28finance29 o Yield (finance) yield on the investment. Put another way, the internal rate of return for an investment is the discount rate that makes the net present value of the investments income stream total to zero.

A project is a good investment proposition if its IRR is greater than the rate of return that could be earned by alternate investments of equal risk. Thus, the IRR should be compared to any alternate costs of capital including an appropriate risk premium. In general, if the IRR is greater than the projects  HYPERLINK httpen.wikipedia.orgwikiCost_of_capital o Cost of capital cost of capital, or  HYPERLINK httpen.wikipedia.orgwikiHurdle_rate o Hurdle rate hurdle rate, the project will add  HYPERLINK httpen.wikipedia.orgwikiValue_28economics29 o Value (economics) value for the company.

This project will not have internal rate of return
2.13 Results
In this case this projects will be analyzed using the excel spreadsheet to arrive at the net present value which will be used in the analysis. All the three alternatives are estimated to contribute equally to the success of the company. Alternative B has the lowest cost in terms of net present value.

One of the APL was making investment projects by construction of the storage tanks. NPV calculations are only as good as the underlying cash-flow forecasts. The well-known pentagon law of large projects states that anything big takes longer and costs more than youre originally led to believe. As the law predicted, the tunnel proved much more expensive to build than anticipated in 1986, and the opening was delayed by more than a year. Revenues also have been below forecast, and storage has not even generated enough profits to pay the interest on its debt. Thus, with hindsight, the tunnel was a costly negative NPV venture.

as shown below
Alternative Net present valueComment Alternative A  -32961572nd Alternative B   -3110592  1st  Alternative C -4,838717  3rd
Using this criterion alternative B will be acceptable.

To choose alternatives with different lives, one assumes that each alternative is replaced in the last year of its life. For the purpose of analysis, the replacement chains of the alternatives can be assume to the periods of time equal to the least common multiple off the lives of the alternatives.

The method for handling the choice of the mutually exclusive projects with different lives can become quite cumbersome if the projects lives are very long. Annual equivalent value of cash flows off each alternative. One accepts the project that has lower annual equivalent cost. The present value of cash flows alternatives A is -3,296,157. If one is to exchange this lump sum with a 20-year annuity starting after one year. The annual equivalent value of Alternative A cash flows is

AEV        NPV_______
                         Annuity factor
                     -3,296,157 (526,602)
                          6.2593
The annual equivalent value of Alternative B cash flows is
AEV        NPV_______
                         Annuity factor
                      - 3,110,592  (481,210)
                               6.4641
The annual equivalent value of Alternative C cash flows is
AEV        NPV_______
                         Annuity factor
                     - (4,838,717)  (773,044)
                          6.2593

The annual equivalent cost of Alternative B is lower than Alternative A and Alternative C therefore, it should be accepted. Normally one assumes that projects can be replicated at constant scale until they at par in terms of years, we imply that an annuity is paid at the end of every n years starting from the first period.

One can summarize the decision criterion for choosing from mutually exclusive projects with unequal lives as follows calculate the real annual   equivalent value of each project, and go   for the alternatives with the least real annual equivalent value. This criterion is based on the premise that each asset will be replaced with an identical asset. However, if the assets are vulnerable to technological changes, this simple rule will not work, and the decision may not be optimal. In such cases, the analysis should consider the future investment opportunities, and the decision may be made on the basis off the NPV of projects accept the project with lowest net present value of costs, or in case of revenue-generating projects, the project with the highest NPV.

The company may carry out investment analysis to indicate that some of the profitable projects may be more valuable if undertaken in the future. It may also be revealed that some of the unprofitable projects may yield   positive NPVs if they are accepted later in their useful live. These categories of investment projects may have different degrees off postponability some of them may be postponed at the most to one or two periods, while a few may be undertaken any time in mutually exclusive alternatives undertake investments.. The firm should determine the optimum timing of investment.

The timing off investment may be a critical factor in case of those investment projects, which occur once in a while and those, which are of importance to the firm. Such projects cannot be deferred for long. Postponability also creates uncertainty. For example, the NPV analysis may show that a firm should introduce a new product next year. The firm may have a corporate strategy of remaining market leader in introducing new products. If it anticipates that its competitors will introduce the product this year if it does not, it may come up with the product this year to remain the market leader. Also for the reason of unanticipated competition from unknown quarters the firm may decide to introduce the product now.

How do we decide the optimum timing of an investment project. The rule is straightforward undertake the project at that point of time, which maximizes the NPV.

An alternative way of approaching the timing problem is to ascertain the next value as of each alternative period when the investment can be undertaken compare the present value of alternative periods. It is noticeable that the firm will make more money as investment is deferred to one or two periods. But the objective of the firm should be to choose that period for undertaking investment which maximizes the NPV.

3.1 Conclusion
From the analysis carried out above that alternative B is the best has it has the lowest NPV of cost and lowest annual equivalent value among the three alternatives, and its value in the next 20 years (Helfert, 2001 Bragg, 2006). On the other hand, investing on alternative A and C would end up in disaster, as the capital invested would lose its value with a higher AEV of cost (Lake, 2000 Fridson, 1996).

They should invest in alternative B as it will increase the shareholders value in both the capital expenditure manual criteria and recalculated NPV. The company stands to gain main from the investment in B rather than other alternatives.

Introduction
Stock market is considered a key indicator of the health of the economy of any country, its policies and the investment climate in the country. This is of particular importance under the globalization regime. The extent of indication depends upon the kind of emphasis accorded to the stock market and the companies listed on the stock market. NASDAQ is one of the premium stock markets of the world known to invite the whos who from the corporate world. This study is an effort to analyze the stock price movement of the share of a reputed company. For the purpose of this study weve chosen Apple Inc (AAPL). Illustration of the price movement of the company would be made over the period of six months from June 2009 to Dec 2009 and subsequently from Jan 2010 to May 2010. Data will be presented in tabular form as well as in the form of a line chart. The volatility is price movements is often interpreted as an indicator of the strength of the company, indicating towards the fundamentals, faith of investors, futuristic projections etc. An effort would also be made to compare the price movement of Apple Inc. with one of its competitors. Citing a number of research reports Arisoy (2009) state that volatility risk is priced and negative in the cross-section of US stock returns. The stock price movement of Apple Inc. depends upon a variety of factors as it has a worldwide presence. The consolidation of its markets, acceptability of its products, and the kind of media buzz its products are able to generate around the world has a direct impact on the price movement of Apple Inc. in Nasdq. United States has been the worst suffer during the recent recession. Though the global economy in general was affected by the recessionary trends, the triggers started off from US. This also had an impact on the sale, revenues and profitability of corporate houses across the board. As signs of improvement are emerging on the horizon, theres renewed hope in the air that things are on way up. Stock and commodities markets too have started gaining the respect and curiosity from investors.

Data
The principle data sources for this study are
Stock price movement chart from Nasdq, is an important source to track the movement of stocks over a period of time. The website also provides tools for making comparisons with other related companies.

The website of Apple Inc. is another source of data. Investor information available on the website of the company provides lot of information related to the policy announcements, launch of new products, corporate social responsibility statements etc. Such news items often influence the price movement of the stock in general. Besides the micro environment the factors on micro scale like the state of economy in the country, the policy initiatives of the government, the policies announced by competing companies also impact the movement of prices on the stock exchanges. The news items like Apple was able to sell one million iPads in just 28 days of its launch provide a huge support to the stock price movement of the company.

Recent newspaper and journal articles are other reliable sources of information for the purpose of this study. In addition to getting factual information, newspapers and periodicals often carry analysis by experts in their respective fields. Such analysis not only helps us in formulating an idea about the specific issues, but it also helps us in providing guidance towards adopting suitable illustrative methods for analyzing the stock price movements.

Results and Discussion
Table-1 indicates the stock price movement of Apple Inc. on the Nasdaq during the month of May in the year 2009 and subsequently in the year 2010. The table also indicates the volumes being traded in the stock market during the corresponding period. Having a cursory look at the price movement, it can be seen that in May 2009 the span of movement was just about 10 as the share price changed from 127.24 in the beginning of May to 135.81 at the end of May 2009. Interestingly the span of price movement during May 2010 was almost similar with a price of 266.35 on May 3 to 256.88 on May 28, 2010.

Table-1 Movement of Apple Stock (Symbol-AAPL) on NASDAQAAPL Price during May-2009AAPL Price during May-2010Date
ClosingLast Price
Volume

05292009
135.81
1,62,76,120

05282009
135.07
1,73,60,630

05272009
133.05
2,30,80,610

05262009
130.78
2,25,89,690

05222009
122.5
1,06,39,520

05212009
124.18
1,45,49,410

05202009
125.87
1,38,52,690

05192009
127.45
1,32,68,680

05182009
126.65
1,63,34,800

05152009
122.42
1,30,93,110

05142009
122.95
1,59,17,350

05132009
119.49
2,11,82,250

05122009
124.42
2,16,75,000

05112009
129.57
1,44,46,470

05082009
129.19
1,67,10,190

05072009
129.06
1,89,43,130

05062009
132.5
1,69,07,110

05052009
132.71
1,42,15,240

05042009
132.07
2,16,94,490

05012009
127.24
1,41,94,280

Date
ClosingLast Price
Volume

05282010
256.88
2,90,92,250

05272010
253.35
2,36,10,050

05262010
244.109
3,03,03,620

05252010
245.22
3,73,34,680

05242010
246.76
2,68,68,300

05212010
242.32
4,36,77,740

05202010
237.76
4,56,42,480

05192010
248.34
3,65,84,210

05182010
252.36
2,78,36,690

05172010
254.22
2,72,01,950

05142010
253.82
2,70,52,640

05132010
258.36
2,13,86,290

05122010
262.09
2,33,40,750

05112010
256.52
3,02,95,420

05102010
253.99
3,50,77,030

05072010
235.86
5,97,94,600

05062010
246.25
4,56,54,970

05052010
255.985
3,14,79,040

05042010
258.68
2,58,02,930

05032010
266.35
1,61,91,950

The big difference in price movement was Apple Inc. shed about 10 in May 2010 while it gained 10 in May 2009. This trend is also visible in the line charts depicted below.

As the chart-1 indicates the share price was quite volatile during the month, with fluctuations from 127.24 to 132.71 in the first week itself followed by a dip of 119.49 in the middle of the month and then another peak at 127.45, but only to come back to 122.9 towards the end of third week. The share price picked up some momentum towards the end of the months and consolidated its position with touching the one month high of 135.81. It will be worth emphasizing here that this particular period was marked with some indications of an improvement in the economic conditions. The indications though were not quite convincing, as some analysts kept pressing the panic button for the US economy. The optimism was therefore not across the board and even the corporate houses were not in a position to take firm positions in respect of new product launches, mergers and acquisitions etc. The trend is quite apparent even at Apple, as the company came out with just one major press release during May 2009, that too for announcing a worldwide developers conference the following month.

The Chart-2 indicates price movement of Apple Inc on the stock exchange during the month of May 2010.

During the first half of the month the stock appears to provide equally confusing signals to the investors. Starting from a peak of 266.35 on May 3, the first day of trading in the month, the stock took a beating in the first week itself and touched a low of 235.86, followed by quick gains and scaling another height of 262.09 in the second week. The share started drifting once again and after sustaining the levels around 250, during the third week, investors made use of another profit booking opportunity which brought down the prices to 237.76. Once again the last week of the month saw another rally towards consolidation and the month ended at 256.88, about 10 below the levels at which the month began with.

The volatility is also apparent if we take a look at the volumes being traded on the bourses during the period. Chart-3, indicates the volumes of Apples share traded on Nasdaq during the 20 days of trading in May 2009 and May 2010. One distinctively apparent pattern that emerges from this chart is that the volumes were much higher throughout the month in May 2010 as compared to May 2009. On the first day of trading in May 2009 the volumes stood at 1,41,94,280 while in May 2010 the volumes were reasonably higher at 1,61,91,950. In May 2010, the volumes even attained a high of 5,97,94,600 i.e. more than 4 times the lowest volumes during the month. Table-2 shows the difference in volume of trade in May 2009 and May 2010. The table indicates the big difference and wide fluctuations in the volumes.

Movement of stock prices also indicates the level of interest of the investor community, the market watchers and the policy makers in the particular stock. If the expectations are quite high from a particular company in the short to medium term, the price movements will indicate a volatile trend, but on the other hand an easy going company, having steady returns and not having any new plans around the corner will not be able to generate much interest amongst the investor community. Comparison of Apple Inc. stock price movement with that of Microsoft Corporation (MSFT) has been done in Table-3.

Table-3 Comparison of Price and Volumes (AAPL and MSFT)May 2009May 2010-06-01Closing Price of AAPL
Closing Price MSFT

127.24
20.24

132.07
20.19

132.71
19.79

132.5
19.79

129.06
19.32

129.19
19.42

129.57
19.32

124.42
19.89

119.49
19.75

122.95
20.06

122.42
20.22

126.65
20.6

127.45
20.31

125.87
20.38

124.18
19.82

122.5
19.75

130.78
20.34

133.05
20.13

135.07
20.45

135.81
20.89

Volume AAPL
Volume MSFT

1,41,94,280
6,31,41,180

2,16,94,490
5,42,80,560

1,42,15,240
6,68,33,870

1,69,07,110
5,96,02,330

1,89,43,130
6,86,72,620

1,67,10,190
6,75,83,970

1,44,46,470
6,37,46,620

2,16,75,000
7,19,06,020

2,11,82,250
4,92,80,690

1,59,17,350
5,44,18,560

1,30,93,110
6,12,32,150

1,63,34,800
4,60,03,810

1,32,68,680
5,13,04,730

1,38,52,690
4,74,39,030

1,45,49,410
5,82,19,980

1,06,39,520
3,73,16,760

2,25,89,690
4,49,85,430

2,30,80,610
4,28,90,980

1,73,60,630
4,54,75,340

1,62,76,120
4,60,28,600

Closing Price of AAPL
Closing Price MSFT

266.35
25.8

258.68
26

255.985
25.01

246.25
26.07

235.86
26.27

253.99
26.84

256.52
27.11

262.09
28.24

258.36
28.5975

253.82
28.94

254.22
28.93

252.36
29.24

248.34
29.44

237.76
28.88

242.32
28.94

246.76
28.21

245.22
28.98

244.109
29.85

253.35
30.13

256.88
30.86

Volume AAPL
Volume MSFT


1,61,91,950
6,74,94,090

2,58,02,930
13,62,93,600

3,14,79,040
17,64,07,600

4,56,54,970
9,81,71,030

5,97,94,600
7,36,34,740

3,50,77,030
11,75,88,700

3,02,95,420
8,79,03,910

2,33,40,750
6,17,28,810

2,13,86,290
5,26,54,570

2,70,52,640
4,60,51,850

2,72,01,950
6,33,17,860

2,78,36,690
4,52,77,260

3,65,84,210
4,70,93,940

4,56,42,480
6,37,73,770

4,36,77,740
8,66,31,120

2,68,68,300
17,36,79,400

3,73,34,680
12,85,02,900

3,03,03,620
6,66,77,610

2,36,10,050
8,20,45,510

2,90,92,250
4,39,84,120

Microsoft is a competitor to Apple in many respects. If we take a look at the product profile of both the companies, it would appear that Microsoft is a software company while Apple is predominantly a hardware company. But the moot point is the software produced by Microsoft is the key decider as far as production of Computer and IT equipment is concerned. On the other hand Apple Inc. prefers to have its own set of hardware and software tools, which brings it in direct confrontation with Microsoft. Chart-4 indicates comparison of Microsoft and Apple Inc Price movements during May 2009.

This indicates that the price of MSFT was comparatively steady, while there were fluctuations in the price movement of AAPL. This could be because of the element of innovation that Apple brought about in the form of iPhone and iPad in the recent past, while Microsoft was comparatively silent during the period.

Conclusion
The above analysis indicates that Apple Inc appears to be a company with much more curiosity amongst investors in the recent past. In fact, Apple Inc is known for the surprise element that it includes in its range of products and services. The stock price movement seems to indicate this very trend over the period that we analyzed its stock.

Table-2 Comparison of Volumes of Trade in May 2009 and May 2010
DateVolumes during May 2009Volumes during May 2010050320101,41,94,2801,61,91,950050420102,16,94,4902,58,02,930050520101,42,15,2403,14,79,040050620101,69,07,1104,56,54,970050720101,89,43,1305,97,94,600051020101,67,10,1903,50,77,030051120101,44,46,4703,02,95,420051220102,16,75,0002,33,40,750051320102,11,82,2502,13,86,290051420101,59,17,3502,70,52,640051720101,30,93,1102,72,01,950051820101,63,34,8002,78,36,690051920101,32,68,6803,65,84,210052020101,38,52,6904,56,42,480052120101,45,49,4104,36,77,740052420101,06,39,5202,68,68,300052520102,25,89,6903,73,34,680052620102,30,80,6103,03,03,620052720101,73,60,6302,36,10,050052820101,62,76,1202,90,92,250

This research paper mainly analyzes the impact of Digital Marketing in the Middle East and it also assesses its impacts on the marketing industry. The study evaluates the challenges facing the companies that implement digital marketing, analyzes the effectiveness if digital tools and compare the effectiveness of the print media and digital media. In addition the study further determines the country in the Middle East that has more potential in using digital marketing. The introduction of digital marketing is slowly replacing traditional or direct marketing.

The main focus of this research proposal is to analyze and identify the rise of Digital Marketing in the Middle East. The research question that has been used as the primary guideline for the study is to discover the growth of Digital Marketing in the Middle East nations.

The main research objectives of this study are to identify the challenges facing companies that implement digital marketing to promote their products, to identify whether the digital marketing tools are effective or not in the Middle East, to identify whether print media is more effective or digital media, to identify the Middle East country that has more potential in employing digital marketing tools and why and to identify the impact of the economic instability of (2009) affected the marketing strategies of the companies or not.

Methodology
In reality, two specific research methods are used the quantitative and the qualitative methods of research. These may be combined to give the mixed-method approach. Quantitative research reveals information that is personal because the participants input serves as the main source of information to the researcher (Creswell, 2001). In the present study quantitative data has been used to run the regression function. Qualitative research generates data that is based on the participants own categories of meaning, it is useful for learning a limited number of cases in depth, and tends to collect data in naturalistic background (Creswell, 2001).

Quantitative research method adopted for the current study.  The data which have been collected are the data of the portfolios formed, the securities and the  which is a measure of risk. In this method the data which have been collected would be analyzed. For this, regression analysis will be carried out in this study. The Ms-Excel software will be used for carrying out the regression analysis.

Basically, in this study, we will be talking about Capital Asset Pricing Model (CAPM). The Sharpe-Lintner version of the CAPM states that variability in market betas accounts for a significant portion of stock returns. The following equations can summarize CAPM in a nutshell.

QUOTE   1
QUOTE   2
Once all  QUOTE  s are obtained, the CAPM can be tested using the following generalized formula
QUOTE   3
QUOTE   is the standard deviation of residual returns  QUOTE   for each security.
The major story behind the Fama and Macbeth (1973) paper is testing the effectiveness of CAPM using 5 hypothesis, they are
C1  Linearity of the Security Market Line  QUOTE
C2 - No Systematic Effect of Non - Beta explains all return variability  QUOTE
C3 - Positive Expected Return - Risk Trade  off  QUOTE
SL - Sharpe - Lintner CAPM  QUOTE
ME - Market Efficiency  QUOTE  )
The hypothesis of this study is. H0 i  i2  Si 0
Against alternative hypothesis H1 i  i2  Si  0
We would be checking whether the explanatory variables, i, i2 and Si have any kind of influence on the explanatory variable, Rit.

Findings, Analysis and Interpretation
The investors take higher risk in order to get higher return from the market. The difference between the market return and the rate of interest is known as the market risk premium which is termed as (rm- rf). In a competitive framework, the expected risk premium varies directly with the  which is a measure of risk. Hence all the investments should be undertaken on the security market line (SML). The entire investment portfolio must be plotted along the slope of the SML. The x- axis represents  and y- axis represents the expected return.

The relationship can be written as
r- rf   (rm- rf)
Where, rf  is the risk free rate rm is the expected return on market r- rf   is the expected risk premium on stocks (rm- rf) is the expected risk premium on market (Brealey and Myers, 1993)

Expected Return on Investment

rm
                                                                                        Security Market Line (SML)
rf


                                                                                          Beta ()                                                                                          
Figure 1 Diagrammatic Representation of the Security Market line

In this study, it would be analyzed that whether the investments on the digital marketing is feasible in a country like Middle East.

In this study,  will be the explanatory variable and return and the securities would be the explained or the dependent variable.

We will be considering the P-value in the regression analysis in order to check whether we can accept the null hypothesis or not. We can also make use of the F statistic and t statistic. But, in this study, we will only take into account the P-value of the analysis. P-value is observed significance level at which a null hypothesis can be rejected.

In case of portfolio 1, the P-value for beta is given by 0.113379124831408. This calculated value is greater than 0.05 at 95 confidence level. It implies that we are accepting the true null hypothesis. In portfolio 1, the beta does not have influence on the return of the stocks.  It means the risk measure has no influence on the stocks. The P-value for securities is 0.211836009968191 which is also greater than 0.05 at 95 confidence level. It implies that we are accepting the true null hypothesis. Securities have no significant effect on the return of the stocks.

Similarly, in case of portfolio 2, it has been found that the P-value for beta is given by 0.301282996184625. This calculated value is greater than 0.05 at 95 confidence level. It implies that we are accepting the true null hypothesis. In portfolio 2 also, the beta has no influence on the return of the stocks.  It means the risk measure has no influence on the stocks. The P-value for securities is 0.000685838018288465 which is less than 0.05 at 95 confidence level. It implies that we are rejecting the true null hypothesis. Here, securities have significant effect on the return of the stocks.

Likewise, in case of portfolio 3, it has been found that the P-value for beta is given by 0.527901. This calculated value is greater than 0.05 at 95 confidence level. It implies that we are accepting the true null hypothesis. In portfolio 3, the beta has no influence on the return of the stocks.  The P value for securities obtained from the regression analysis in portfolio 3 is 0.266503. This is also greater than 0.05. Here also, we are accepting the null hypothesis. The securities have no significant influence on the return of the stocks.

The P-value for beta obtained from the regression analysis in portfolio 4 is found to be 0.88735.  This is obviously greater than 0.05 at 95 confidence level. It can be said that we are accepting the true null hypothesis (Type I error). The P value for securities obtained from the regression analysis in portfolio 4 is 0.202. This is also greater than 0.05.

0.817 is the P-value for beta which is generated by performing the regression analysis of portfolio 5. This is greater than 0.05 at 95 confidence level. The P value for securities obtained from the regression analysis in portfolio 4 is 0.136. This is also greater than 0.05.

Thus, it has been seen that all of these five stocks may or may not have influence of beta (), (which is a measure of risk) and securities. If the value of  increases, then (r- rf) which is the expected risk premium on stocks also rises.

Now, we will be analyzing portfolio number 200201 to 200512.
In the 1st portfolio, the P value for beta square is -2.9 which is less than 0.05. Here, we are rejecting the null hypothesis. The beta square has significant effect on the return of the stocks. However, as the value of beta square is negative, they have a negative relationship. As the value of beta square increases, the return of the stocks decreases.

Introduction
Project investment selection implies various choices between new investment and replacement investment or between make or buy or between buy or lease of equipment or even between widening of product line or diversification and deepening of product line or extension in same product line investments (Bierman, 1993). Such project investment selection involves analysis of the economic and financial feasibility aspects such as the return on investment and risk involved.  As was highlighted in CFO Executive Board (April, 2005), the main reason for an analysis of the project investment proposals is to ascertain where the future profits or cash flows will be the maximum and will redeem the initial investment outlays. Then only will the wealth of the stakeholders be increased and the organizational goals met. The selection of type of investment has to be made based on certain objective criteria known as techniques of capital budgeting.

Technique of Capital Budgeting  1
The Payback or Payout period is a very simple rule-of-thumb approach. As the term suggests the technique answers as to how long will it take to recover the invested capital outlay and hence is always concerned with number of years. With the advent of cash inflows from the project there will come a time when the original financial outlay will be recovered and that is the point when the payback occurs and the duration is the payback period for that investment. While accepting or rejecting a proposal some specific issues may have to be considered. For example, if the firm has a specific requirement that the invested outlay should be recovered in three years, then any project with a payback period less than three years would be preferred to those with longer payback periods. But for mutually exclusive projects which are alternative investments where if one project is taken on, the other must be dropped then the one with the shorter payback would be accepted (Morgan, 2001).

Some of the important features of the payback technique include that it is quite popular because it is very simple to calculate and easy to understand because it is a rule-of-thumb method. This technique places too much emphasis on short term returns and quick liquidity thus ignoring projects with long term sustainable gains. This method does not really show the extent of the profitability of the project because it does not consider the cash inflows after the payback period is attained. The major defect of this method is that it ignores the time value of money. If this gets incorporated than it will have some credibility particularly for high technology industry where the strategic focus is on avoiding obsolescence.

Technique of Capital Budgeting  2
The Accounting Rate of Return on investment or the ROI is just the reverse of the payback method. If we use AAnnual Cash flow IInvestment then Payback period  IA. but if we reverse this ratio and calculate the same in percentage terms, we get AI x 100  ROI. It can be easily seen that the decision rule for applying the payback method is shorter the payback period, more acceptable the project while he decision rule for ROI method is larger the ROI, more acceptable the project. Though the ROI is an established accounting method to compute financial profitability of a project, one may end up estimating different rates of return, depending upon the nature of measures used. For example, Annual Cash flow A for a number of years may be related to investment I such that one may compute the ROI for the project as

 QUOTE   separately, or one may compute  QUOTE  . In the second case, the computation is for the average ROI which may be different from a single year ROI like  QUOTE    the point remains the ROI method may be used by way of accounting convenience rather than accounting convention. More important, similar to the payback method, this ROI method also does not consider the time value of money.  

Technique of Capital Budgeting  3
Over the years the Net Present Value or the NPV method of judging the acceptance or otherwise of a project has gained popularity (Froot, et al. 1995). The basic reason is that the process of discounting of all the future cash flows, including outflows or costs and inflows or revenues, can be converted to their present value. The NPV method gives due cognizance to the fct of time value of money and calculates the result thereof (Michel, 2001). Since capital is being raised and invested to day it will naturally be convenient if there is knowledge of how the sum of all the future net cash flows would appear today and it would help tremendously to judge the profitability of the investment after taking into account the cost of capital instantaneously (Lin, et. al., 2000 pp. 36). This is exactly what the NPV and also the IRR seeks through the process of discounting the cash flows and bringing them down to a common denominator being their present values using a rate of interest which in this case would be the firms cost of capital (Khan, 1993). Even if the firm uses its own funds rather than tapping the market, the profitability or otherwise of the investment should be judged using the market rate of interest as the guide.

Thus the process to judge the profitability and acceptability of the investment involves knowledge about the various inputs like the initial investment, the cost of capital, the net cash inflows, and the life of the project in number of years. Then the next step is to convert the net cash inflows to their PV using the discounting factors given by the cost of capital and then summing up these PVs.  After deducting the initial investment outlay from this the resultant is the NPV of the investment. If the NPV is positive, the project is acceptable and the larger the NPV, the better the project. For mutually exclusive projects, the one with the higher NPV should be chosen (Ehrhardt, et al 2006). The project with the maximum positive NPV will always be the choice of the management as this will yield the maximum cash flows as well as future profits for the organization.

Technique of Capital Budgeting  4
Under the NPV method the initial investment was deducted from the sum total of PVs of all future net cash inflows after using r the discounting factor to arrive at the NPV of the project which would in most cases be positive. But the Internal Rate of Return or the IRR goes a step further and investigates at what r will the NPV  0, that is the sum of PVs at that r of all future cash inflows will equal the initial investment (Project, et. al., pp. 269).

What is that r which will make the NPV  0 Following the NPV analysis above it amounts to this that where the NPV is positive, the value of r will increase to reduce the value of NPV to eventually make it zero and where the NPV is negative, the value of r is too high and accordingly, the cash flows would have to be discounted using a lower r so that the value of the negative NPV would be reduced and the process continued until it reaches zero. The rationale of using IRR, as in the case of NPV, is the same, namely that if everything could be interpreted in todays terms taking a decision would be more easy. If the resultant r is greater than the cost of capital then the investment is worth undertaking. The IRR is defined as the discounted rate r which equates PV of the expected future cash flows to the initial cost of the project. It has to be noted that IRR is a percentage concept while the NPV is a sum, either positive or negative at a given r.

Both these Discounted Cash Flow (DCF) based methods, NPV and IRR have a similar feature that they take into account the time value of money which is their major virtue. It must be noted that of the two, the NPV is a simpler method and provides a logical acceptance criterion. In the case of IRR, the cash flows may not be able to attract a re-investment rate equal to r and yet it may be assumed in the IRR method that cash flows are to be re-invested at the IRR rate. This may be totally unattainable due to the magnitude of the r. Also, the r may not be the true r because if there are negative cash flows in between the years, then the possibility of multiple IRRs may emerge. As a rule-of-thumb the number of times the negative cash flows occur will determine the multiplicity of IRR and this leads to the advantage of using the NPV method. The NPV has its limitations, one of them being the selection of the discounting factor or calculating the cost of capital, because it is very likely that the firms cost of capital will change over a period of time though the pool of borrowed capital may look representative at a particular point of time. Thus because equity capital is much costlier than say debentures, raising the equity base during the course of the project might just change the overall cost of the project. To incorporate the flexibility in fixing the cost of capital in the NPV method, the cost of capital has to be used over a range rather than one fixed for the entire life of the project.

While normally both the NPV and IRR methods will show the same results, in some mutually acceptable investment proposals, there might be different results for the NPV and IRR methods, with the NPV method advocating one proposal and the IRR method advocating another (Graham, et al. 2001). Since these are alternative investment proposals wherein only one has to be accepted such alternative proposals are called mutually exclusive projects and are mostly of either technical or financial in nature (Pogue, 2004 pp. 565-570).

The technically mutually exclusive proposals deal with decisions regarding buy or make, purchase or lease sort of decisions and of the alternative outcomes only one outcome should be chosen and it will be that proposal which is the most profitable. In times of financial constraints when there are limited finances on hand for the organization, that project which will give the maximum profits will be chosen out of a bunch of proposals even though some other proposals are also showing a yield more than what is anticipated. This situation arises because the limited finances available have to be rationed or allocated very stringently and the organization may not find it prudent to invest in more than one available proposal.

The different results obtained by the NPV and IRR methods may also be the resultant of the size of the initial investment outlay or the differences in the time periods of the projects under evaluation or even because of the uncertainty of the project life. When the initial investment envisaged for mutually exclusive proposals is different with the investment being more in some cases, then the NPV and IRR calculations will give different readings. When all the NPVs calculated are positive for such mutually exclusive proposals than the one with the largest positive NPV value will be accepted and this will also be in line with the organizational goal of maximization of the wealth of their stakeholders since this acceptance will result in an increase in the share prices in the market (Madhumati).

Similarly when the IRR results for mutually exclusive proposals having varying initial investment outlays, are different but are also positive then also that proposal will be accepted which shows the maximum initial investment will be accepted. Though an exercise can be conducted to verify this acceptance by calculating the extra or marginal investment required and the cash flows envisaged for the mutually exclusive proposals, then calculate the IRRs for these marginal cash flows and after all calculations are done if the marginal cash flows indicate a positive IRR the proposal requiring more initial outlay will be accepted. This selection of the proposal is because the organization would get higher profits from proposals requiring more outlay than those requiring less because the yield will be more. This process is termed as the Modified IRR or the MIRR method (McCracken).

Conclusion
Also where the time period of the mutually exclusive projects vary, there may be a relatively irregular pattern of cash flows for these proposals (Daves, et. Al., 2000). This problem of time disparity may occur even though the initial investment for these projects is identical but the cash flows are varying. Here also the NPV method is superior to the IRR method for evaluating investment proposals. The bottom line is that the NPV method is very superior and more acceptable to the IRR method because it takes into consideration the organizational objective of maximizing its stakeholders profits which is not the case with the IRR method.

Project analysis is required because there is a limitation to the financial resources available and there are more than one investment proposal to be considered. Therefore these different projects have to be evaluated simultaneously and not as individual project. There may be a influence of non financial considerations like organizational policies, competitive advantages in the market and the policies of the competitors. What is essential is that the organizational goal of maximizing shareholders wealth has to be the main goal and the process of analysis of the investment proposals aimed at achieving this objective.

Human rights is a wide area that needs a lot of approaches before one can comment anything or even accuse another party as to whether it promotes human rights or not. In this regard, this study seeks to evaluate if Australia is genuine in its pursuit to advance human rights in other countries or not. Therefore, the task aims to make a judgment in this matter.  It is worthwhile therefore, to understand that one cannot pass a judgment if there are no material facts. It is imperative to review the available circumstances in Australia that illustrate human rights issues and more so, where Australia is a key player.

Normally, a party is said to promote or violate the rights of another party if it fails to fulfill its duty towards that very party. That is the principle to be considered throughout this study, period. To reiterate, a party can only be said to have violated another partys rights if and only if it has a duty towards that party. Consider the following case. Country X has committed itself to advance 100,000 as donation to country Y which is a third world country. It has even signed several agreements with the government of country Y to re-emphasis its commitment. Now, it suffices that several government officials decide to fraud the funds released such that only 60 of the money is advanced to country Y. In the long run, the intended project fails to be executed and the financial crisis in country Y swells more and more. This is a violation of duty by the fraudulent government officials in country X since they have misappropriated the funds contrary to what the government had unanimously agreed. By virtue of the fact that the government of country X had committed themselves in aiding country Y in its financial crisis, it therefore became a right to country Y and so they were entitled to the money. Any interference with the process would be a violation of rights.

Another important issue to consider is the principle of subsidiarity which obliges well-to-do countries to come to the aid of poor countries. This is a duty in the normative sense and de facto. This means that it needs not be under any written law or any financial regulations. It is an end in itself and should always be regarded as such. Consider the following case. Country X goes to war and leaves a 1000 of its citizens homeless. They in turn seek refuge in country Y which is just a neighboring country. But, they come up with non-citizen policies that make it harder for the refugees. The policies subject them to hardships, economic strain, and lack of sense of belonging just to mention a few. This in itself is a violation of rights as far as human dignity is concerned.

The above examples illustrate human rights as a transitive movement for instance from country X to country Y. However, there are moments when the movement could be directed to the subject itself, hence intransitive. It is in this level that this study can seek to analyze to what extent Australia is genuine in the advancement of human rights in other countries. Consider the following case country X decides to advance 450,000 to country Y and yet is undergoing serious financial crisis. Country X is experiencing instability in the provision of credit facilities. So, it would beat logic for it to advance aid to country Y. Such a move is not genuine at all. Also, consider the following example country X is undergoing a lot of corruption and almost all its financial institutions are undergoing a crisis. The revenue got ends in the pockets of few individuals. However, country X intends to intervene in the financial crisis of country Y and even promises to take part in the improvement of the vice. To this extent it looks awkward and a contradiction and so company X cannot be said to be genuine in this pursuit.

Human Rights in Australia
The Universal Declaration of Human Rights took place in 1948 during the United Nations General Assembly. It was declared that the promotion of the in-born dignity of the person, including his inalienable rights is the beginning of freedom, justice and peace in the world. Human rights connotations have been greatly affected by the ethical relativism that is also cutting across many nations in the name of revolutionizing democracy. This has rendered certain aspects of human rights be looked at from a subjective point of view hence killing the universal value in them.  It is also noted that violations of human rights and freedoms that Australia look down upon are largely evident across the world. For instance, cases of genocide, torture, rape, lack of due process of the law, just to mention a few. Australian government is on record for having been criticized for its failure to address some of the aforementioned human rights violations. In particular, it has been accused of brushing off the human rights violation in neighboring East Timor. Furthermore, it is believed that there remain groups of people in Australia whose rights have not been recognized or protected especially in Indigenous Australians, certain ethnic groups and people with disabilities.

It is worthwhile to note that the laws of a country in turn translate into the rights and freedoms that the citizens are entitled to. In other words, duties and rights are conferred by the laws in place. For instance, if in Australia the law prohibits the use of loud noise in the neighborhood, it therefore becomes a right to the citizens. In one accord, they can argue that they have a right to cool environment without any loud noise. It therefore becomes a duty to the owners of restaurant or extravagant joints to ensure they maintain maximum silence. Again, the law can state that it is illegal for an Australian to harass refugees no matter what the circumstance. In this regard, it becomes a right to the refugees not to be harassed by the Australian natives, and on the other hand, the Australian natives have a duty to respect the refugees.

The Australian rule of law is important in the protection of human rights both locally and internationally. This principle is re-echoed in the preamble to the Universal Declaration of Human Rights where it is underscored that human rights ought to be safeguarded by the Rule of Law. There were concerns regarding Australias performance in promoting the human rights of the asylum seekers and refugees. In the same context, a section of the Australian government undermined the rule of law that was fundamental for the protection of human rights by lack of accountability in relation to refugee matters.

The Australians Indigenous people experience certain disadvantages in the area of health, life expectancy, employment and lack of adequate basic necessities and quality housing. In addition, poor standards of education experienced by some groups have been associated with the impact of poor health, for instance, hearing damage from chronic ear infection experienced by 93 of children in remote areas. Furthermore, the indigenous health has continued to deteriorate due to the poor condition of households in the same areas. Back in the year 2002, about 9 of Indigenous households lived in overcrowded conditions which made them more vulnerable to the spread of the infectious diseases that derived from stress put on basic household facilities. On the same note, 31 of dwellings in this areas needed repairs while on the other hand, there were no sewerage supply. These poor conditions have been linked to the low mortality rates, where it is believed that 76 of Indigenous males and 65 of Indigenous females dye before the age of 65 years. The Indigenous people are more prone to diabetic related cases, heart problems, respiratory and kidney diseases. This fact has made it imperative for the Australian Medical Association to ask for more government expenditure on Indigenous Health.

Australia is on record for its discriminative tendencies especially the exclusion of Indigenous people from citizenship which lasted until 1967. It was noted that in 1994, Australia subjected migrants who did not possess visas to mandatory immigration detention and deportation a move that was criticized by Amnesty International. It advocated for better viable economic mechanisms and humane ways of dealing with asylum seekers. In the opinion of the UN Human Rights Committee, after its review of Australias Human rights record, suggested that Australia was in breach of the International Covenant on Civil and Political Rights (ICCPR). There are on-going debates in Australia regarding the length of time that detainees are held in the detention and the impact this has on their mental health.

Refugee-Asylum Issue
It is believed that people choose to seek refuge in Australia and not other countries. In principle, there are certain factors that can attract refugees to a given country. It could be that the country is a signatory to the Refugee Convention or it could be that the country is opposed to the persecutory regime. Notably, migrants get access to Australia territories with no hustles for documentations and this is not considered as a defraud to the system. Australia is among the signatory countries to the refugee convention where under its Humanitarian Program grants permanent visas to refugees and asylums to resettle in Australia. It is believed that Australia intends to resettle 13,500 people in the period between 2008-2009 program and 13,750 people in the period between 2009-2010 program. The Humanitarian program has got two subsections namely the onshore and the offshore. In the former, it offers protection to all those people in Australia who are refugees a prescribed in the United Nations Refugees Convention. In the latter case, it offers resettlement for people not living in Australia but are in need of humanitarian assistance.

The statistics as per the UNHCR 2008 Global Trends, Australia is recorded to have released 20,919 visas to refugees and other refugee-related conditions. This makes it be ranked at the 51st position with a share of 0.8 globally.

The implication of a ban on short selling of securities on future market
Short selling of securities involves selling of borrowed securities usually from a broker or third party while intending later to buy identical securities so as to return to the lender. The seller aim at making profit owing to a decline in prices between sale and repurchase transactions. In other words the buyer pays less in buying assets (security) than heshe receives by selling the securities. Incase prices increases, the seller incur losses. The seller is also likely to be charged a fee for borrowing the assets. Heshe may also be required to pay any dividend accruing from the borrowed asset (Fabozzi 2004 Tauli 2004).

Part of income gained from changes in price accrues to the owner of shares. In a case where this practice is banned investors will not receive such income. This will also reduce their participation in the stock market as this was their main activity in the capital market. Speculators who earn a living from short selling of securities will no longer be earning this income and the consequent is that this may reduce employment opportunities.

Short selling of securities contributes to market volatility which is undesirable to the investors. The ban on this practice is expected to reduce factors that lead to undesirable market conditions. This will ensure stable prices for such securities. Most of borrowed securities are owned by various institutions. In their effort to earn more earnings on their investments they offer their shares for lending. In case price increases, the borrower is likely to be unable to buy identical shares so as to return to the lender. In such a case, the financial position of the lender is threatened. Ban on short selling of securities will ensure such occurrence which may lead to fall of stock brokers and stock market at large do not occur. This also curbs fall of institutions (lender) listed in the stock market.

Participators in short selling of securities are speculators who provide liquidity and depth of future markets and improvement of the markets efficiency. In their attempt to make profit they exposed themselves to risks. A ban in this practice will benefit the future market participants. It will reduce the risk taking activities in the market which may be interrupted as fall in returns to many stock market participants borrowing from the risk and return relationship.

Short selling activities make the price of shares more volatile and difficult to predict. The volatility of capital market keeps off many investors from buying shares in fear of capital losses. Volatile capital market also threatens the ability of any firm listed in the stock market to raise finances through selling of its share. A ban will ensure a stable share prices which will create investors confidence. Similarly, investors will be able to make informed uninterrupted decision about prices of various shares. A ban on short selling is likely to reduce

In conclusion, a ban on short selling of securities has a number of effects for future market. It affects the volatility of share prices in a positive way i.e. make the share prices stable, it also reduces participation from the speculators (borrowers) and finally reduces cases that may lead to fall of stock market. This in one way or another will be beneficial for future market participators.

Part 1-Dissertation proposal
Introduction and Background

Banks are financial intermediaries that accept channels and deposits the deposits into borrowing and lending activities. It is an important part of our financial system and the financial markets are also controlled by them. The fundamental part of banks is to join or connect those people who are seeking capital (people who want a loan for their business or to meet their needs) to the people who have capital (depositors or investors).

Coming over to the history of banking, the first banks we most probably and possibly the ancient worlds temples. They were the securest places to save precious stuff suck as gold and silver. Also History shows us that in Greek temples of ancient Greece were indulged in conducting financial activities such as providing loans, deposits, credits etc. Be it the Jews or the Muslims banking were one thing that almost every race adopted because it was a basic necessity of life. By 1100s the need to finance the crusades was risen and in 1200s there was a rising need of international and long distance trade in large amounts of manufactured goods and agriculture commodities. The banking took a huge step when the London Royal Exchange came into being in 1565. At that time the term banks were only given to the offices and not the current meaning that it has today. And then in 1609 The Amsterdam exchange bank (Amsterdamsche Wisselban) came into being which made this city the center of finance of the world. In 17th century the offices of banks were located near the centers of trade. Groups and individuals had the right to participate by purchasing bills on credit from these banking offices. Now a little fast forward in the banking history to the time when capital market services and global banking was prevalent in 1980s and 1990s which was due the fact that there was a great increment in demand from manufacturers, customers, suppliers and information centers around the globe. And by the end of 2000 a world record level of financial transactions with a 10.5 trillion market value and the top 10 banks had a share of 80 or more. However nowadays the banking system is extremely complicated and sophisticated but the usurious and hidden mechanism is the same.

The banking industry has been revolutionized during the past years. Now there are three trends which have changed the course of banking and aroused the interest of public. He thinks that the local industries are merging with big corporations and the retail stores are turning into chain stores. Now during the past seven or eight years there was a failure of 4925 banks out of 30812 operating. This questioned the systems soundness. The indispensible failure of the system is when the funds entrusted to it act as a safe repository, these funds are used for investment by the banks within certain limits but the funds must be eventually returned to the depositors. Now this system and its soundness is being criticized because of the dismaying and shocking fact that around about one sixth of US banks are hanging with losses to their depositors. The second thing is that the phenomenon of independent local banking is almost extinct and it broke down in almost one fourth of US banks. Branch banking restriction causes some of them to bring into existence chains and at the same time threatens to become systems. And finally there comes the mergers in bank which starts a new financial era. Now these are the things which are the main reasons of attraction. In the last part the bank failures are caused by reduction and also because of the mergers there is absorption of banks. Now in a nutshell these three movements the systems weakness which was showed by the failure of many banks, the tendency if the banks to be unified by group banking or chaining and the scenario of mergers. Now all of these three trends are related and have their commencement in the incorporation and making a mark in the industry and business. (Bernhald Ostrolenk, May 6 2010)

There is a lengthened chronological association with the growth and development of traditional commercial banking practice and religious conviction. As Brown and Skully (2007) have put it, some of the earliest economic transactions commenced with the storage of gold in religious temples which expanded at a swift pace, thereby, allowing the ancient Greeks to make credit notes which were acknowledged throughout Greece. Islamic banks and financial organizations are operating in accordance with the facilitations and decrees of the Islamic Shariah law, which denies benefits by means of any form of usury. Islamic banks function on the basis of sharing profits and losses with their clientele which is in contrast with the conventional banking systems, whose chief task is to intermediate by lending money at higher rates of interest than paid by the bank on funds which are set down by the borrowers, thereby, obtaining gains from the margin between the two. What is more, Islamic banks operate in facilitating money transactions as well as exchanges, whereas, the conventional banks function on the products that are purchased or sold with the use of interest as well as time. More to it, the Islamic religion forbids trade of money for money, however, allows money to be put to work, and then take part in the profits or losses which are realized (Alford, 2003) which is the base of Islamic funds.  Recognized and strict banking has now been existent for nearly a thousand years, with Islamic Banking being associatively a new phenomenon as the first Islamic Bank, Mit Ghamr Local Savings Bank of Egypt, which was established in the year 1963 (Brown and Skully, 2007).  However, even then, the actual development of Islamic finance did not commence until the late twentieth century when the Middle East nations went through a giant rise in surplus funds. Since that time, the Muslim investment has extensively spread all throughout Europe and Asia, while Islamic finance is yet to expand. The straight Islamic financing approaches and methods such as with the Islamic bonds are gaining huge prominence in the West similarly as the Islamic based funds management has done so far.

With time passing by, there has been an increased demand for Islamic Banking provisions all across the Muslim world, chiefly, in the dearth of benefits. In order to function, Islamic bank system became dependent upon the work of Islamic law. Hence, since that time, Islamic banking has prosperously spread all over the world, as it operated according to this pattern, and as a result, became one of the largest established bank systems set to compete with the conventional banks (Iqbal and Molyneux, 2004). Eventually, according to Khan and Ahmed (2001), Islamic Banks possess a number of products which are compatible with the Islamic Law, such as Murabha, Musharaka, and Mudaraba (Khan and Ahmed, 2001).

In 1981 the Gulf Cooperation Council (GCC) was formed in Dubai joining all six countries (Saudi Arabia, United Arab Emirates, Qatar, Oman, Kuwait and Bahrain) to reach a cooperative frame work in all fields (GCC.org). Each of the GCC nations is autonomous in terms of currency and administration. It is predictable that the entire population of this region is nearly 34 million, and the principal religion in all the nations of the Gulf Cooperation Council is Islam. The GCC nations are affluent in natural reserves, for example, oil and natural gas. The Gulf States have developed into the largest reliant export hubs for oil which is a key requirement in the global market (Saif, 2009).

Lets have a look on the history of mutual funds. Now on March 21, 1924 Massachusetts Investors Trust which was found which is now known as MFS Investment Management. At that time the closed-end funds of the entire industry had a representation of about 10 million. Now in 1929 the crash of the stock market was a major obstruction in the the mutual funds growth. Certain policies were laid down by the Congress in response to this crash. The laws clearly stated that a fund has to be registered with SEC (Securities and Exchange Commission of US) and it also offered likely investors with a bright prospectus which contained the necessary disclosures about the securities, fund manager and the fund itself. Now with rehabilitated confidence in the financial market, the effectiveness of mutual funds increased and blossomed. In the late 1960s there were 48 billion assets with 270 funds.

In 1975 the Internal Revenue Code changed which allowed IRAs (Individual Retirement Accounts) to be opened by the individuals. This was a very important factor in the growth of mutual funds. Now there are 2015 mutual funds as of October 2007 which belong to ICI(Investment Company Institute) with combined value so assets estimating to more that 12.356 billion. And the mutual funds amounted to 26 trillion in the early 2008. Vanguard 500 Index Fund is one of the biggest and largest mutual funds in the world with an estimate of 100 billion assets or even more.(Wikipedia.org, mutual funds)

Aims and Objectives of the Study

The focus of this study will be on Islamic mutual funds originated in the GCC countries. This paper aims to find if there is a significant difference in performance between the funds located in each GCC country with its respective market benchmark. Furthermore, the study aims to find if the Islamic funds in GCC countries outperform or underperform international Islamic indices. The final aim of the study is to find if the Islamic funds are riskier or more safe that the relevant benchmarks. Furthermore, the study aims to find if the Islamic funds in GCC countries outperform or underperform international Islamic indices. Another aim ofthestudy is tofind ifthereturnsofthesefunds were gained through increasing the risk or it was done through experienced fund managers. Furthermore, this study will examine the impact of the financial crisis ontheIslamicfundsandcompare is withthe impact of the crisis on the relevant markets. Finally this study willdiscusstheviabilityofinvestingin theIslamic mutual funds in the end of the dissertation.
Research Methodology and Data

The research methodology for this study is based on the similar variables which have been taken up by studies carried out in the past on fund performance. In this dissertation, the basic Capital Asset Pricing Model (CAPM) will be used to measure the Islamic funds performance in the GCC region by comparing each country Islamic funds with their relative market index.  Coefficient of determination and t-statistics will be applied in the process by regressing the monthly excess gain (loss) of the fund with the market monthly excess gain (loss). The same methodology will be applied for all the GCC Islamic funds but with a non-regional Islamic index like Dow Jones Islamic Market. Now we also use the Carhart model because it was found that more than half of the portfolios of our Islamic equity funds are expected to underperform than the equity market benchmarks.  However at national level a slight tilt towards growth is shown by the Islamic funds.

The data for this research will be provided from secondary data providers. The market indexes and risk free data will be acquired from DataStream and this secondary data is provided through the university laps. The remaining data regarding the Islamic fund in the GCC countries will be acquired from and will also provide by the university.    

Structure of the Dissertation
This dissertation centralizes on performance of the Islamic funds in GCC region, and has been segmented into seven chapters. The structure of this dissertation is as follows

Chapter 1
The first chapter comprises of an introduction to the research, and also introduced the research questions. The significance of understanding the performance of Islamic funds in the GCC is discussed and enlightened.

Chapter 2
The second chapter provides with an overview of the Islamic Banks, conventional mutual funds and Islamic funds. This is inclusive of a general idea of the history along with the challenges they confront, and what are the fundamental rules and regulations. More to it, this section prefaces some of the most significant Islamic funds types.

Chapter 3
The third section of this dissertation offers a basic concept of the economic life in the GCC, prior to the presentation of the banking industry, and the financial markets in the GCC, followed by the comparison of the evaluation.

Chapter 4
This chapter offers a summary of the studies and researches that have been carried out on the performance of funds. The evaluation is not restrained to Islamic funds, but will be on both the conventional fund and the Islamic funds.

Chapter 5
This section puts forward the data important for this study. Also, the attributes and features which will be brought into use in the analysis of the Islamic funds are thoroughly explained.

Chapter 6
Chapter 6 explains the results and conclusions of the research, thereby, displaying the findings.

Chapter 7
The last chapter confirms and discusses the outcomes of this research. In addition, it covers the section of references and bibliography that have been used.

THE PROPOSAL

CHAPTER 1

INTRODUCTION
This chapter basically comprises the introduction of our research and also we will discuss the research questions. We will also discuss and enlighten the importance of understanding the Islamic Funds performance in GCC. The research methodology used in this study is based on variables which are similar in one way or the other and which have been taken up by different studies in the past years on the performance of mutual funds. The focal point of the research will be on the Islamic Mutual Funds which are originated in the GCC countries. We aim to investigate if there is variation in returns between the Islamic funds, with respect to its relative market benchmark, located in the Gulf Countries. The research also aims to find that the Islamic International Indices are outperformed or underperformed by the Islamic funds in GCC. Moving on our main focus of discussion in the proposal will be whether the Islamic funds are safer and riskier than the relevant benchmarks. And also we will discuss if it does better than or worse than the International Islamic Indices. We will also study the fact that the returns the investors get on the funds is due the increasing risk or was done through the expertise or experience of the fund managers. We will also study the aftereffects of the crisis on the Gulf countries and how it affects the Islamic funds and also on the relevant markets. We also aim at discussing the feasibility of investing in Islamic funds.

Now I will shed some light on the methodology of the research i.e. what ratios and models will we use to compare and evaluate the data. We are using the CAPM (Capital Assets Pricing Model) which will measure the performance of the funds in the GCC region by taking each Islamic fund with its relative index and comparing it. T-statistics and the Coefficient of determinant will also be used in the process by regressing the monthly gain (losses) of a fund to the monthly excess (gain or loss). We also used this methodology for the non-regional Islamic Index like Dow Jones Islamic Market and also for the GCC Islamic Funds.

The research methodology for this study is based on the similar variables which have been taken up by studies carried out in the past on fund performance. In this dissertation, the basic Capital Asset Pricing Model (CAPM) will be used to measure the Islamic funds performance in the GCC region by comparing each country Islamic funds with their relative market index.  We will also perform Carhart test on the and evaluate the performances of the GCC based Islamic fund on this basis. The same methodology will be applied for all the GCC Islamic funds but with a non-regional Islamic index like Dow Jones Islamic Market. The risk free data and market indexes are obtained from Datastream and by the University.

Now we also use the Carhart model because it was found that more than half of the portfolios of our Islami equity fuunds are expected to underperform than the equity market benchmarks.  However at national level a slight tilt towards growth is shown by the Islamic funds. And there is also the fact the Islamic funds of the same country asses their investment style and financial performance sufficiently. So to take in account ant to control for the regional and the global factors we develop a Carhart Model (three level) which consists 12 factors which are used to control for our Carhart three level model and for equity market at three levels
In the region or the same nation
In other nations of a particular region
All the regions of world

This model that we are using is very sophisticated and it leads to different results. Now this model that we are using is very sophisticated. Now only two fifth of the IEF portfolio is found to underperform international equity benchmarks whereas only one fourth outperforms them significantly.

Following are the questions on which our research will be based on
Is there any significant difference between the financial performances of equity market benchmark and the Islamic Equity Mutual Funds
Islamic Equity Funds prefer which investment styles
How to explain the national differences if they exist in IEFs financial performance

THE PERFORMANCE OF ISLAMIC FUNDS IN GULF
The industry of the Islamic Finance continues to build-up at a rapid pace. For Sharia an Islamic law based on Koran, there has been a double digit growth for the assets compliant with this law. Over the past ten years new territories have been explored by the Islamic financers both outside Arab and whitin their state. According to ( Muslims.net 18 march 2010) There are approximately 680 Islamic funds out of which 45 is in GCC. According to latest economic report there is a neighborhoods running assets of 70 billion US dollars. The 306 member states of Gulf who use Islamic Funding are said to witness a really fast-track producitivity which is because of the fact of increasing wealth.

As Ernst and Young puts it the assets of GCC Funds (Islamic) increased from 276 USD billion to736 USD billion in a span of one year. The report also indicated that the customer base of Islamic Funds in GCC has dramatically increased over the last decade. These funds basically respond to the needs and wants of an investor and they have a say in the wealth management field. 147 funds are acquired by Saudi Arabia which amounts to 19.6 and a massive 18 USD Billion.  While UAR has 55 funds which totals to 5.5 USD Billion in assets. Kuwait has 36 funds which has a value of USD 3 billion and finally Bahrain has 20 funds managing about one USD Billion.

Head of the GCC Equities, Mr Talal Al-Tawari, at GIC (Gulf Investment Corporation) stated that Gulf Primier Fund is the 1st of its kind in GCC. He thanked the team of GCC shares, the research team and also the impressive experience of the portfolio management experts. GCC Shares achieved an impressive 11.49 return. He also endorsed the fact that the economies of GCC are the most stable despite of the financia crisis across the globe. He attributed the success to various factors whch included their professional approach in seleting and evaluating opportunities for investing. Mr. Al-Tawari also applauded the brilliant performace of these funds and highlighted the fact that in 2009 there was a 34.3 growth. (ASDAs Public relations 2009) . According to ( Al-Babawia 5th feb 2010) The Markaz(Kuwait Financial Center) approces the fact that the GIC (Gulf Investment Corporation) is investing in GCC with a return of 24.6.

Given below is just an overview of the performance of Islamic Funds in GCC According to the Islamic Fnance News Guide 2008 The Amanah GCC Equity fund was on the top in 2007 with a return of 81.67 then was the Amanah Saudi International Fund which had 81.23 return in the market. Then we had GCC Al- Raeed Fund whose Fund manager was Samba and it had a return of 79.87 Next on number 4 we had the Al Rajihi Local Shares Fund which had a 7.98 return. On nmber 5 there was Bakheet Saudi Trading Equity Fund whose fund manager is Bakheet Investment Group  and had a return of 73.87. And by the sharp ratio The funds of Amwal Islamic Money Market which had a 2007 return on 7.59. The Boubuan Financial Fund  had a 2007 return of 6.48 and Boubuan Financial Fund KWD whose fund manager is boubyan had an impressive return of 7.16.

Chapter 2
The second chapter provides with an overview of the Islamic Banks, conventional mutual funds and Islamic funds. This is inclusive of a general idea of the history along with the challenges they confront, and what are the fundamental rules and regulations. More to it, this section prefaces some of the most significant Islamic funds types.

ISLAMIC BANKS
Islamic banks and financial institutions are operating in accordance with the provisions and the laws of Islamic Sharia law, which denies benefits via any form of usury. Islamic banks operate on the basis of sharing profits and losses with the client. This is contrary to conventional banks, whose main work is to intermediate by lending money at higher rates of interest than the bank pays on funds that are deposited by borrowers and deriving profits from the margin between the two. Moreover, Islamic banks operate in facilitating money transactions and exchanges. The traditional banks operate on the products bought and sold with the use of interest and time. Furthermore, the Islamic religion prohibits trade of money for money, but allows money to be put to work and then participate in the profits or losses that are realised (Alford, 2003).

Over time, there has been increased demand for Islamic banking services across the Muslim world, especially in the absence of benefits. In order to operate, Islamic banks in the system depend upon the work of Islamic law. The idea of Islamic banking in its present form began in 1963 in Egypt and was conceived by Dr. Ahmed Al-Najar, who introduced the idea of the savings bank in Germany. Since that time, Islamic banking has successfully spread all over the world based on this template and has become one of the largest bank systems prevalent and now competes with conventional banks (Iqbal and Molyneux, 2004). Finally, Islamic banks have a number of products that are compatible with Islamic law, such as Murabha and Musharaka and Mudaraba (Khan and Ahmed, 2001).

The GCC countries are comprised of Saudi Arabia, Oman, United Arab Emirates, Bahrain, Qatar and Kuwait. The GCC was established in 1981 with the aim of coordinating the various areas of social, political and economic relations between these countries. Each of the GCC countries are independent 6
of each other in terms of government and currency. It is estimated that the total population of the region is approximately 34 million people, and the predominant religion in all countries of the Gulf Cooperation Council is Islam. The GCC countries are rich in natural resources such as oil which was discovered in 1940 and natural gas. The Gulf States have the largest reserves of oil in the world and they have become heavily reliant on exports of oil needed by the global market (Saif, 2009).

CONVENTIAL MUTUAL FUNDS AND ISLAMIC FUNDS
According to (investopedia.com,Mutual Fund,2010),a mutual fund is An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the funds capital and attempt to produce capital gains and income for the funds investors. A mutual funds portfolio is structured and maintained to match the investment objectives stated in its prospectus. Conventional funds have many types but the main types are Equity fund, Money fund, Hedge fund, Market fund, Bond fund and Hybrid fund. Mutual funds are called open end Investment Company since the shares number outstanding can be changed. With the various funds types a large number of investors have become more interesting in them because they believe that these funds are managed by professionals and these funds have lower risk because of the diversity of the financial instruments invested in by these funds (Saidov, 2007).

Now they say that forewarned is forearmed so it is extremely important and very essential to perform a mutual fund research before investing in mutual funds. A drawback in mutual funds is that is not insured or guaranteed by the FUDC so it is a possibility that you might loose some money. While comparision of these funds it should be noted that the past performances of funds should not be set a criteria and can never be an indicator for future performance. So there is a great deal of risk involved if you invest on the basis if past performance. (Multiplyyourwealth.com, mutual-funds).

Islamic funds on the other hand are Sharia compliant. Like conventional funds, Islamic funds also have various types of funds but the main types are Mudarabah fund, Murabaha fund, Ijarah fund and the last main type of Islamic fund is a mixture of these funds (Zai, 2008). To be a Sharia compliant the fund should not contain any assets deals with or profit from Riba or Gharar or any Haram (forbidden) like pork, alcohol, gambling and weapons. Since the funds invest in multinational companies stocks it became hard to find a fully compliant asset to invest in. for that reason, some scholars allowed Islamic funds to invest in these non-fully compliant assets as long as the revenue from these Haram operation is very small (Hoepner, Rammal,  Rezec, 2010). A report from (eurekahedge.com) in January about the islamic funds world wide indicates that the sharia compliant financial instruments have separated geographically and also the asset classes have been increasing rapidly. The report estimates the assets managed under Islamic funds to worth around 70bn and the number of these Sharia compliant funds is about 680 funds worldwide.

Now despite of their advantages, as (mutual-investor.com) puts it Mutual Funds have their short comings soch as huge costs are incurred in commissions and fees.  Now even in the past the mutual funds have underperformed in the history so most of the Non Muslims but Index Funds i.e. a  fund which keeps a track on the major market index. And also there is one drawback that you dont have any idea that where you money is being invested. For example Islamically prohibited activities (Tobaccos, Banks, Alcohol etc) can be done from a Muslims investment without him knowing that what is being done with his money.

Now coming over to the disadvantages of Islamic Banking, According to (Healy consultants) the first one is rather an advantage to the Muslims but not for the Muslims is that the Investments made only sustain the acticitivities that arent forbidden by Islam. For example ( Banks lending money to another bank would not be allowed as there is inclusion of interest rates, or trade in alcohol and tobaccos) are not allowed. Now it is a known fact that money defines the value of something it doestn have any value itself so therefore there shouldnt be any increament for a money that is simply being stored in a bank, via fixed payments, or by leding it to someone else.
Following are some of the fundamental rules and regulations

Shariah compliant The funds should be Shaiah compliant.
Invest  in ethical issues As I talked above that investment can only be done in activities whih are not forbidden in Islam.

Governed by shariah council The overall investing is governed by a shariah council which oversees the activities performed by the funds.

Any income declared by shriah as haram is expensed out So technically you cant do anything against the shariah or it will be regarded as haram.

Any investing in interest related activities is also prohibited.
The risks and rewards are equally shared by the investor and the user of capital.
Following are some of the types of Islamic Funds

Mudarabah Fund
On the basis of equal sharing of rewards and risks the Mudarabah funds can be invested in any specific business.

Equity Fund
Now over here the profits and losses are deduced through gains one get by buying the shares and then selling when the prices of their shares are high. Profits are also obtained through dividends. Now the Shrariah Experts say that if the organization is in comformity with the Shariah i.e. the company does not indulge in any forbidden activities then these shares can be sold and held without any fear of being haram.

Murabaha Fund
Mufti Taqi Usmani regards the current sale adopted by various financial institutions as mode of financing. He believes that they buy something for the betterment of the clients and sell it at a profit margin which is agteed. Now if this kind of sale is to be undertaken by the funds then that funds should be a closed ended one and non-negitiable in the market.

Ijarah Fund
Mufti Taqi Usmani says that the organizations which deal in the leasing assets as per the Shariah principles and the funds involved in this case are the Ijarah Funds. Users charge the rentals and the ownership of the assets is under the Fund.
Mixed Fund

Mufti Taqi Usmani believes that there is another type of fund i.e. Mixed Funds in which there is subscription of equities, investments, commodities and leasing. This type of fund should be a closed end fund.

Chapter 3
The third section of this dissertation offers a basic concept of the economic life in the GCC, prior to the presentation of the banking industry, and the financial markets in the GCC, followed by the comparison of the evaluation.
GCC countries

This study investigates the profitability of conventional and Islamic banks in the GCC region. It is essential to study banking and its work in the Gulf region, because there are many challenges faced, and issues arising when foreign partners enter into the ownership of these banks. First this chapter gives an overview of the GCC and then it offers an economic overview of the GCC countries. This chapter also looks at banking in the GCC region and discusses the total assets collectively between GCC countries. At the end it presents an overview of the financial markets in the GCC.

Overview of GCC
The GCC was established in 1981 and aims to co-ordinate policies in the various activities be that economic, political or social in the Gulf region. It is based on the activation of the inter-relationship between these countries and seeks to unify and deepen relations. The Council also aims to strengthen the relations of social, educational and cultural relations. The members of the GCC states are six countries the Kingdom of Saudi Arabia, Kuwait, the Kingdom of Bahrain, the United Arab Emirates, Oman and Qatar.

In 1940, the discovery of oil in the Gulf region propelled the area to become the richest region in the world in terms of oil wealth as well as the presence of other natural resources such as natural gas. Finally, the oil is the primary resource on which the Gulf States exports are based.

Economic Background of the GCC
The governments of the GCC trade in oil as it is a royal government. Their economic experiences are rather stable and similar. In addition to that the general populations in the GCC do not bear any taxes to their governments. However, some duties are imposed upon the issuance of certain licenses or customs duties. The aim is to try to open the economy among the countries and to assist in the entry of foreign investors. Moreover, the GCC is seeking to develop other activities and open up to other economic areas such as agriculture, tourism and industry in order to reduce their dependence on the primary export of oil (Al-Jarrah, 2002).

Increased exports of GCC oil since 1970 has affected the trend of economic growth positively. To measure the size of the economy of a country it is conventional to use real GDP. In table 3.1 in the appendix, the movement of real GDP of the GCC countries in the last period until the present can be seen. Also, as can be observed, the movement of GDP during these years in the GCC particularly in the Qatar has been unusually pronounced. Finally, table 3.2 in the appendix illustrates GDP growth from the numerical side.

It is possible to calculate the GDP per capita after the apportionment of GDP by the number of people in the population. That shows how the average salary received by the people has changed over time. According to International Monetary Fund, World Economic Outlook Database, October 2008  Qatar recorded the highest value of GDP per capita with 67,921 and those people living in the United Arab Emirates enjoyed the second largest figures for GDP per capita with 38,804 and then Kuwait with 31,014. Bahrain was followed by Saudi Arabia and most recently Oman recorded the lowest with 14,013.

Some of the GCC countries lack natural resources and therefore they have to import these materials from other countries for example, food products. For this reason, the percentage of imports in the GCC countries is relatively high, which increases as exports of oil increase. For example, Saudi Arabia ranked first in terms of exports, while Bahrain exported the least. The United Arab Emirates ranked first among the GCC countries for the value of goods imported and Bahrain ranked as the last. This can at least in part be explained by both Saudi Arabia and the United Arab Emirates having large land areas and also big populations and Bahrain occupying only a relatively small land area and having a much smaller population.

GCC Banking
The British Bank of the Middle East was one of the first foreign banks to operate with branches in the GCC countries. There are now many other well-known foreign banks operating in the region and the main reason for their presence is the existence of high revenues from the oil trade. On the other hand, 21domestic banks dont have sufficient experience to compete with those foreign banks. In response, GCC governments agreed to limit the activity of foreign banks. For example, GCC governments committed foreign banks to follow the laws of their central banks. In addition to that, the Government of Saudi Arabia has limited the share that a foreign partner can take in a domestic institution to 40, and the rest must be local remain in local hands (Iqbal and Molyneux, 2005).

GCC currencies were linked to the US dollar during the period from around 1950 to 1970. The reason for this was that a large proportion of the proceeds from the oil trade were priced in US dollars. Another reason was that they did not have a common currency. However, steps are now underway for the GCC to establish a common single currency by 2010.

According to Al-Suhaimi (2001), banks working in the GCC countries have been affected by the crises experienced. These crises include the war that was fought between Iran and Iraq from 1980 until 1988. Second, in 1986 the price of oil fell significantly. Third, was the war that resulted when Iraq invaded Kuwait in 1990. More recently was the last war in Iraq that started in 2004 between the US-led coalition and Iraq. One consequence of these events was the rise in many non-performing loans.

The GCC has worked to coordinate and improve the banking system in the region, through their banking systems to link with other international banking systems. The indication is that, the GCC has been involved in gatherings with the World Bank, the Basel committee and the International Monetary Fund (IMF). The consolidation of banking systems is illustrated by the pictures by accepting opening open branches of Gulf banks in each country in the Gulf region and the other was the establishment of a national network of ATMs (Al-Jarrah 2002).

The Financial Markets in the GCC

22 Financial markets in the GCC region have only recently emerged compared to other financial markets in developed countries. For example, by comparing the size of the Saudi stock market, in 2006 the value of traded shares amounted to SR 1226, while the value for the American market was more than 13 trillion. The fact is that trade in financial markets in the GCC has only been initiated in recent years. Additionally, trade in these markets is another means of capital for bank loans. At the present, growth has allowed foreign investors to gain access to the GCC markets and this has especially been the case since some of the GCC policies were changed, accession to the World Trade Organisation (WTO) was granted and the signing of the Treaty of General Agreement on Tariffs and Trade (GATT).

Treasury bills, government bonds and Islamic Sukuk are commonly used in the GCC. They are used to financially support the large-scale projects such as airports, sports facilities and hospitals. For example, the Government of Qatar has issued Islamic Sukuk for the construction the Hamad Medical City (HMC).

In a nutshell, this chapter has presented an overview of the GCC countries. Firstly, it presented the region in economic terms, which indicated that the GCC has started to take steps to develop other sources of income and reduce its dependence on oil revenue, in order to improve the performance of the economy. This has been observed through the observation of exports-imports, GDP growth, real GDP and GDP per capita. Secondly, this chapter reviewed the first banks to have operated in the GCC and found that the banking sector has been affected by the wars that occurred since the early 1980s. Finally, financial markets in the GCC have been compared to other financial markets in developed countries. Also, it is explained how the GCC allows foreign investors to invest in the regions financial markets.

Chapter 4

This chapter offers a summary of the studies and researches that have been carried out on the performance of funds. The evaluation is not restrained to Islamic funds, but will be on both the conventional fund and the Islamic funds. The literature on funds performance is vast all over the world for different regions and countries and it was conducted for different time periods. On the other hand studies about Islamic fund performance are much fewer than the studies on conventional fund performance. Furthermore, studies on Islamic funds in the GCC region are even fewer than studies about Islamic funds in general. Now I will give some example from various studies that has been carried out in the past regarding the mutual funds and Islamic funds especially in the Gulf countries.
For example Saidov in 2007 conducted a study in the German mutual funds. The main purpose of his research was that by using seven different approaches he wanted to analyze critically the mutual funds that were invested exclusively in the German Stock Market. The approaches used by him were the CAPM Jensens alpha, and Carharat Model.  The study by taking the mutual funds from January 2001 to December 2006 investigated the results of performance measurement. And moreover Saidov also tried to fund the correlation between the fund rankings and also if the same funds are regarded worst or best performing funds because of the performance management over the same period of time. It was also found out that the Index funds did the worst in Germany.

Cuthbertson, Nitzsche,  OSullivan conducted a study in 2005 to determine whether there is luck or skill involved in the mutual funds performance. They used a very comprehensive set of data which consisted of the mutual funds if UK (both surviving and non-surviving) from April 1975 to December 2002. To differentiate between skill and luck they used a bootstrap methodology for individual funds.  A major issue in investing in funds is the eccentric risks of that fund which this methodology allows. Another important issue that is constantly bugging the investors is that they are very interested in identifying that which one are a very good performer and which one is a very bad performer because obviously an investor would want to think over and over again before investing anywhere. The basic study points of their research is the subsistence of the genuine picking ability of the among the UK mutual funds (that is performance which isnt due to good luck solely). Now they said that at the end of their performance scale (negative), the analysis rejects their hypothesis that funds which perform poorly are merely unlucky. Such funds depict and demonstrate bad skill. Temporal stability in portfolios performance alpha of loser and winner was indicated by Kalmansmoothed coefficients and Recursive estimation.

In 2008 Roman K and Raphie Hayat did a research on charachteristics of return and risk on the Islamic equity funds. As we all know that the IEFs (Islamic Equity Funds) differ drastically from the conventional equity funds because the Muslims limit their ability to invest in only certain companies which are not forbidden and are complied by the Shariah. So the Muslims do not generally invest in companies that receive or pay interest. This study talks about the performance and the returns on IEFs over the previous ten years. The results in their study showed that investing in Islamic equity funds is a safe choice and they at times significantly out- or under perform the Conventional as well as their Islamic benchmarks under market conditions. They also stated that in 2002 during the bear market, the conventional as well as other Islamic funds we out performed significantly by the Islamic Equity Funds. They also have a greater risk to return ratios.

In 2010 Hoepner, Rammal,  Rezec did research on the financial performance of Islamic funds and their investment styles.  They tried to pursue the first ever investigation on a large scale on Islamic funds which is the strongly growing fund type nowadays. They analyzed the investment style and the financial performance of 265 Equity funds (Islamic) from 29 countries. Investors from diverse regions invest in Islamic funds, so they developed a Carhart Model- three level which is conditional and this model is used to control the exposure to various regional, national and global equity markets as well as the investment styles. It is a widely known fact that in the Islamic financial market the Islamic funds are said to show superior learning than the conventional funds. As the Islamic funds in these markets show competition to equity benchmarks internationally, the Western nations funds with especially few Islamic assets tend to underperform significantly. Now the graph of the invest style of Islamic funds is directing towards growth stocks. A small and a clear cap preference are shown to the funds by the predominantly Muslim Economies.

In 2008 Sanjay Bose and Robert W. Mc Gee did analysis on the returns and risks of the Islamic mutual funds. We all know that the popularity of Islamic finance is increasing day by day. In this study they present a brief overview of the different types of Islamic Funds (investment) and also analyze the relative productivity and performance of each fund which is an attempt to talk about the investment avenue which has a potential high growth. This study basically begins with the identification of classification of various Islamic funds and then later there is a discussion on the fund structures. The paper ends with a list of challenges which are faced by the Islamic Funds and also the opportunities that are there for those people who understand the Islamic Funds.

Chapter 5
This section puts forward the data important for this study. Also, the attributes and features which will be brought into use in the analysis of the Islamic funds are thoroughly explained.

(failaka.com, the performance of Islamic equity funds) The table below shows the Net assets by different regions in the world and we can see that the GCC has the highest number of shares.

Then we see the number of funds, assets, shares and the average age of the funds taken from the Report the Performance of Islamic Equity.

GCC N of funds Assets (mm) Share  Average Age (yrs) Saudi-Arabia 26 4426,6 75 2,6 Kuwait 9 963,6 16 4 Bahrain 5 457,8 8 2,7 UAE 3 88,2 1 2,2 Ireland (HSBC) 1 0,5 0,01 1 Total 44 5936,7 100 2,5

As we can see that Saudi-Arabia is the most significant money market provider as it has the highest number of funds and 3 quarter of the market is under its control. Now Bahrain has ambitions to become an important financial hub in the Middle-east. Now as there isnt any heavy taxation in Bahrain so potential investors view it as a suitable haven. Now the number of IEFs during the past years has experienced an enormous growth as we can see from the table the 2-5 years is the average life of a fund.

Investment style and financial performance (CAPM and Carhart)

This table basically illustrates the Carhat model and the CAPM results for each portfolio of Islamic funds in GCC( Andreas H  2010

Country  Region CAPM
  pmodel
nat, p
p
nat, pCarhart Model
nat, p
nat, p
nat, p
 GCC Bahrainn

-0.0003

0.4156

-0.0028

0.6102

0.0552

-0.1173

0.0358 Kuwait-0.00190.5879 -0.00240.5813 0.07820.0255-0.0148Saudi Arabia-0.0248 0.8974 -0.0252 1.0249 0.16710.2014-0.0520UAE0.003010.7146 0.0083 0.8310 0.0496-0.1637 0.0334Qatar
 -0.0061

0.6924

-0.0059

0.6913

0.1931

-0.0792

0.0369

The research methodology for this study is based on the similar variables which have been taken up by studies carried out in the past on fund performance. In this dissertation, the basic Capital Asset Pricing Model (CAPM) will be used to measure the Islamic funds performance in the GCC region by comparing each country Islamic funds with their relative market index.  Coefficient of determination and t-statistics will be applied in the process by regressing the monthly excess gain (loss) of the fund with the market monthly excess gain (loss). The same methodology will be applied for all the GCC Islamic funds but with a non-regional Islamic index like Dow Jones Islamic Market. Now we also use the Carhart model because it was found that more than half of the portfolios of our Islami equity funds are expected to underperform than the equity market benchmarks.  However at national level a slight tilt towards growth is shown by the Islamic funds.

Table 3. National financial performance and investment style (CAPM and Carhart)

Country  Region CAPM
  pmodel
nat, p
p
nat, pCarhart Model
nat, p
nat, p
nat, pAdj R2 CAPMAdj R2 CarhartAfricaEgypt-0.0079 0.6468 -0.0075 0.6587 0.1768 -0.0781 0.05090.8420.852Morocco-0.0149 0.4179 -0.0136 0.4238 0.3521 0.2304 -0.08860.2200.320South Africa Asia Indonesia-0.0092

-0.00130.8348

0.3290 -0.0081

0.00050.8657

0.3579 0.2299

0.1200 0.0571

-0.1824 0.0465

0.04540.850

0.6110.865

0.648Singapore-0.00240.3019 -0.00030.3240 0.2939 -0.2351 0.0724 0.2670.371Malaysia-0.00340.3564 -0.0039 0.3289 -0.06660.0464-0.06820.4270.437Pakistan -0.004 0.4985 -0.0047 0.5096 0.0774 -0.0058 0.0303 0.720 0.714Australia Europe Luxembourg-0.0155

-0.0081 0.4260

0.6592 -0.0146

-0.0078 0.3598

0.6747 0.4764


-0.0094-0.2159

-0.0933 -0.3538

0.0412 0.124

0.6560.113

0.683Germany-0.0101 0.6523 -0.0088 0.7710 0.1209 -0.09850.1300 0.6950.726Ireland0.001360.4784 0.00010.5166 0.1109 -0.00570.01280.5620.570Liechtenstein-0.0078 0.4065 -0.0097 0.4122 0.8321 -0.3200 -0.8538 0.1040.345UK GCC Bahrain-0.0081

-0.00030.7038

0.4156 -0.0087

-0.00280.7014

0.6102 0.1158

0.0552-0.2092

-0.1173 -0.0615

0.0358 0.702

0.2940.728

0.465Kuwait-0.00190.5879 -0.00240.5813 0.07820.0255-0.01480.6530.648Saudi Arabia-0.0248 0.8974 -0.0252 1.0249 0.16710.2014-0.05200.4250.418UAE0.003010.7146 0.0083 0.8310 0.0496-0.1637 0.03340.8070.832Qatar
North America
US-0.0061

-0.0045 0.6924

0.8568 -0.0059

-0.0052 0.6913

0.8288 0.1931

0.1574 -0.0792

-0.0841 0.0369

0.0434 0.829

0.8400.813

0.855Canada-0.00290.7245 -0.0040 0.7669 0.02080.0429-0.02520.7320.736

CHAPTER 6

Chapter 6 explains the results and conclusions of the research, thereby, displaying the findings. The above findings have been proven to be consistent over a lengthy time period. The above findings are also independent of capital market restriction imposed by the respective government f the company from time to time.

From the above findings we could see that Islamic funds performances as measured by the CAPM and CHART model discussed above shows that Islamic Funds have significantly lower Japanese Alpha while they have o an average been unable to outperform the national market benchmark. Nearly all the funds have a beta of less than 1 thus indicating that portfolio managers also prefer international markets and plus the fact that Shariah fund prohibits investing using leverages.

CHAPTER 7
Now we compare and analyse the Investment style and the financial performance of the Islamic Equity Funds in GCC. We develop a Carhart Model three level (conditional) model to control a funds exposure to regional, global, national, investment styles and equity market simultaneously. Our Findings from this study does not give us the permission to conclude that the Islamic funds outperform or underperform the equity markets. However the Islamic funds of the 5 biggest Islamic Centres i.e. the GCC countries perform competitively or even outperform the benchmarks of international equity. On the Contrary the portfolios of Islamic funds of other nations underperform their benchmarks significantly because they have less developed Islamic services.

Our results have various implications. First of all because of nearness to the Islamic financial centres, the Islamic funds benefit. This allows the funds to develop more expertise. Secondly in Muslim economies the Islamic funds prosper. The higher utility i.e. the agents and consumers can boost the economies they receive from Shahriah . Thirdly the government have the right to boost the Islamic Funds attractiveness by developing financial markets.

The investment style of the Islamic funds are tilted towards growing investments which is the result from the under proportional leverage provided by the growth stocks. A small cap preference is shown by the funds of the predominantly Muslim economies. This is likely to lead to two routes for future research. First, that if sufficient data for Islamic funds host nations is acquired, this will reflect greater risk and the diversified organisations to invest in sectors that are forbidden by the Shariah. Next
Exploration of specific processes in depth because of with Islamic markets can support the Islamic Funds can improve our understanding of the financial services( Islamic) and also allow the government to grow effectively.

Part 2- LITERATURE REVIEW
Islamic Banking An Introduction
In this time and age, Islamic Banking system is believed to be one of the premium trades in the banking industry. The industry is comprehended to be 46 years old. We can define Islamic Banking as interest-free banking that works on the exchange of profits and losses. Hence, in this chapter we will talk about the origin and history of Islamic Banking. To start with, we will compare the services that are provided by Islamic Banks along with their activities in association to those of the conventional banking systems. Following it would be a study of the history of Islamic banking, while the last segment would comprise of the acceptance and prohibition of chores in Islamic Banking, followed by the examination of loan contracts in Islamic Banks.

2.1 Comparison of activities of Islamic with Conventional Banking
Conventional banks function to intercede between the depositors and borrowers. Banks lend money that is deposited by customers to the borrowers. Hence, the bank obtains revenue from the different between the amounts received from the borrowers as well as payments to the depositors. What is more, the banks bear expenses which will aid in attaining the functions of bank such as the payments of staff. Such functioning expenses are then reduced from the revenues earned. However, Islamic banking system takes up a different approach for the same. It is operated without taking any benefits, and is totally dependent upon the participation in profits or losses with its clientele. Moreover, it sustains its revenues from the investments it does throughout the fusion with the conventional banks so as to acquire an acceptable rate of return for depositors, however, should be agreed with the Islamic norms and policies. It is, as a result, quite lucid that the main disparity between the conventional and Islamic banking system is the way they make use of money. Where in conventional banks, money is essentially used for the purchase and sale of goods by way of interest, the Islamic banking system uses the money to smooth the progress of transactions and businesses.

The principles and regulations of Islamic Banking are obtained from the Quran and words of the Prophet Mohammad. According to the Quran, there are three major practices which have been outlawed, and hence, they should not be contracted with in Islamic Banking. These three practices are Riba, in other words, interest Maysir or Betting and Gharar or uncertainty. It is well-known amongst the Islamic territories that Riba is prohibited in Islam as it is referred to in the Quran. It is the increase on the loan, irrespective of whether it is a fixed or variable one, or for a short or long term. This is believed to have led to difficulties in the economy along with a lack of efficacy which may be as a result of the lenders suffering huge losses for having collected many of the funds. Also, for the reason that this enables a number of benefits to deal, it is believed to have led to the inflation of the debt pyramid in the world. On the other hand, Gharar or Uncertainty is strictly forbidden in Islam and is also referred to in the Quran. It is believed that Gharar will happen in case the seller is unaware of what he is selling, and the buyer of what he is purchasing. For that reason, there must be an exact provision and explanation in detail of what is being retailed or purchased, and the target is always to eradicate any ambiguities associated with it. The third and the last factor is Maysir or Betting, which is also strictly forbidden in Islam, which construes to gambling or speculation and betting. The reason for averting this activity is due to its mysterious behaviour, and the returns are not assuring re-entry. Hence, we can construe that all of these practices are prohibited and are not used in Islamic banking for specific advantages.

2.2 History of Islamic Banking
According to Iqbal and Molyneux (2005), particularly in the year 1963, the first Islamic Bank was founded by Dr. Ahmed Al-Najar who accomplished his learning in Germany. He worked for a number of conventional banks which operated quite well. Following that, he went on to become one of the most acknowledged leaders in the banking arena when he thought of a concept regarding Islamic banking from the savings banks in Germany. The notion of an Islamic banking sector rose up to be of tremendous interest after a hiked demand in that period, chiefly, from the Islamic countries, for the reason that it had the interest-free component. Post the huge success of the bank founded by Al-Najar, a second Islamic bank was introduced in the year 1971, called Nasser Social Bank in Egypt, which was patterned to provide loans to people as a charity foundation, relying on the basis of exchanging profits and losses, along with aiding the needy. After this concept was launched by the Islamic banks in 1975 in the Islamic humankind, the Dubai Islamic Bank was founded in the United Arab Emirates, along with The Islamic Development Bank established in Saudi Arabia (Wilson, 1990).

The AMF (2009) provides extensive information about the banks introduced thenceforth. In 2004, The Association of Islamic Banking and Islamic Banks declared that there were 267 Islamic banks in 48 countries round the globe, and that the size of assets as held by these banks was equal to nearly 260 billion. On the other hand, the Arab Monetary Fund also announced in 2008 that the number of Islamic banks in Arab as well as Muslim countries increased at a significant pace in the current years, and the value of assets functioned by these institutions in the Arab region had lengthened from six per cent in 2000 to 12.3 per cent in 2006. As a result, it can be seen that Islamic Banking is the swiftest developing banking sector for two main reasons

The increase in demand from the clientele to implement their money in accordance with the Islamic law.

Liquidity leading from the oil burst in the Gulf Cooperation Council as well as other countries.
As stated by the AMF, the total assets of Islamic banks in Saudi Arabia reached approximately 40 billion in the year 2006, while banks in the State of Kuwait and United Arab Emirates reached around 26 billion and 36 billion respectively (AMF, 2009). More to it, the spread of Islamic banking all over the countries of the world is not too selective for the Islamic nations. This is due to the fact that, as stated by Abdel-Majid (1981), beginning from all around the world, thereby, transcending the national restraints for uniting Muslims against a common pattern in the economy as well as politics considerably influences the world trade (Abdel-Majid, 1981), beginning from all around the world, thereby, transcending the national restraints for uniting Muslims against a common pattern in the economyas well aspolitics considerably influences the world trade.

2.3 Conventional and Islamic funds (History)

Now I will shed some light on the concept Mutual Funds. During the past decade various investors have been increasingly interested and turned to this concept i.e. mutual funding to meet their financial goals as well as to save for retirement. Now these funds present the benefits and advantages of professional management and diversification, however as is the case with any funds or investment choices a great deal of risk is involved. Taxes and fees can reduce the funds returns. To be on the safe side it is very essential that you understand and evaluate each and every risk involved in investing in mutual funds and also you should have a brief overview of the cons and pros of mutual funds.

A company which takes money from various different investors and with that funds they invest in bonds, stocks, capital or other assets or possibly other securities is called Mutual Funds. Portfolio is the name given to the combined holdings that are owned by the mutual funds. An important characteristic of mutual funds is that the investors who buy the funds, instead of getting shares from the investors they get the shares from the mutual funds itself. Now the shares of mutual funds are redeemable and the people who invest in it can, at any time, sell their shares. Another important aspect of mutual funds is that it creates and sells and creates shares to give a hope or accommodation to the new investors. And this is the sole reason why people and constantly selling their shares. The investment advisors usually manage the mutual funds investment portfolio.

Now they say that forewarned is forearmed so it is extremely important and very essential to perform a mutual fund research before investing in mutual funds. A drawback in mutual funds is that is not insured or guaranteed by the FUDC so it is a possibility that you might lose some money. While comparison of these funds it should be noted that the past performances of funds should not be set criteria and can never be an indicator for future performance. So there is a great deal of risk involved if you invest on the basis if past performance.

According to (investopedia.com,Mutual Fund,2010),a mutual fund is An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are operated by money managers, who invest the funds capital and attempt to produce capital gains and income for the funds investors. A mutual funds portfolio is structured and maintained to match the investment objectives stated in its prospectus. Conventional funds have many types but the main types are Equity fund, Money fund, Hedge fund, Market fund, Bond fund and Hybrid fund. Mutual funds are called open end Investment Company since the shares number outstanding can be changed. With the various funds types a large number of investors have become more interesting in them because they believe that these funds are managed by professionals and these funds have lower risk because of the diversity of the financial instruments invested in by these funds (Saidov, 2007).

 Conventional funds and Islamic funds are the same except that Islamic funds are Sharia compliant. Like conventional funds, Islamic funds also have various types of funds but the main types are Mudarabah fund, Murabaha fund, Ijarah fund and the last main type of Islamic fund is a mixture of these funds (Zai, 2008). To be a Sharia compliant the fund should not contain any assets deals with or profit from Riba or Gharar or any Haram (forbidden) like pork, alcohol, gambling and weapons. Since the funds invest in multinational companies stocks it became hard to find a fully compliant asset to invest in. for that reason, some scholars allowed Islamic funds to invest in these non-fully compliant assets as long as the revenue from these Haram operation is very small (Hoepner, Rammal,  Rezec, 2010). A report from (eurekahedge.com) in January about the Islamic funds worldwide indicates that the sharia compliant financial instruments have separated geographically and also the asset classes have been increasing rapidly. The report estimates the assets managed under Islamic funds to worth around 70bn and the number of these Sharia compliant funds is about 680 funds worldwide.

2.4 Literature on Funds Performance

The literature on funds performance is vast all over the world for different regions and countries and it was conducted for different time periods. On the other hand studies about Islamic fund performance are much fewer than the studies on conventional fund performance. Furthermore, studies on Islamic funds in the GCC region are even fewer than studies about Islamic funds in general. An example of a conventional funds study is the Saidov (2007) paper where he concluded that in Germany the country funds perform the best and the growth funds came after it. On the other hand, index fund performed the worst among the German funds. In that study the researcher used seven measures to reach this conclusion. These measures were Jensens Alpha, Sharpes Ratio, Treynors Ratio,Famas Ratio,Sortino Ratio,Information Ratio,Fama French Three Factor Model and the normal CAPM. Another study was performed to find if the performance of a fund is resulting from skill or luck by (Cuthbertson, Nitzsche,  OSullivan, 2005). The study was executed on UK stocks and the outcome was that some of the best ranking funds shown genuine stock pricing skills. In 2008 Roman K and Raphie Hayat did a research on charachteristics of return and risk on the Islamic equity funds. As we all know that the IEFs (Islamic Equity Funds) differ drastically from the conventional equity funds because the Muslims limit their ability to invest in only certain companies which are not forbidden and are complied by the Shariah. So the Muslims do not generally invest in companies that receive or pay interest. This study talks about the performance and the returns on IEFs over the previous ten years. The results in their study showed that investing in Islamic equity funds is a safe choice and they at times significantly out- or underperform the Conventional as well as their Islamic benchmarks under market conditions. They also stated that in 2002 during the bear market, the conventional as well as other Islamic funds we out performed significantly by the Islamic Equity Funds. They also have a greater risk to return ratios.

Then Hoepner, Rammal,  Rezec, 2010 about Islamic mutual funds they could not conclude if the Islamic funds in different regions outperform or underperform their equity markets. In their study they stated that Islamic funds in GCC countries and Malaysia were competitive or even outperform the benchmarks. This study had a sample of 265 Islamic funds from twenty countries. CAPM and Carhart model, three level Carhart model and conditional three level Carhart model were the tests used in that research to answer there three aimed questions about the funds performing over or under the benchmark, style if investment preferred for those Islamic funds and how to explain if there are any national differences in the fund performance between those countries. (Sanjay Bose, Robert W. Mc Gee 2008) did analysis on the returns and risks of the Islamic mutual funds. We all know that the popularity of Islamic finance is increasing day by day. In this study they present a brief overview of the different types of Islamic Funds (investment) and also analyze the relative productivity and performance of each fund which is an attempt to talk about the investment avenue which has a potential high growth. This study basically begins with the identification of classification of various Islamic funds and then later there is a discussion on the fund structures. The paper ends with a list of challenges which are faced by the Islamic Funds and also the opportunities that are there for those people who understand the Islamic Funds.