The impact of religious practice on stock returns and volatility |
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| Institution: | 1. Department of Finance, School of Business and Administration, American University of Sharjah, Sharjah, United Arab Emirates;2. USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon;3. Center for Energy and Sustainable Development, Montpellier Business School, Montpellier, France;4. Department of Accounting, School of Business and Administration, American University of Sharjah, Sharjah, United Arab Emirates;1. Poznan University of Economics and Business, Poland;2. University of Dubai, United Arab Emirates;3. AGH University of Science and Technology, Poland;1. Institute of Economics, Leuphana University Lueneburg, Scharnhorststr. 1, 21335 Lüneburg, Germany;2. Forschungsinstitut zur Zukunft der Arbeit (IZA), Germany;3. Institute of Empirical Economics, University of Kassel, Nora-Platiel-Str. 5, 34109 Kassel, Germany |
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| Abstract: | With a psychological and behavioral perspective, this paper examines whether religious practice, through its influence on investors' moods and emotions, affect the behavior of the stock markets and investors in 15 Islamic countries over the period December 31, 2005 to December 31, 2015 and over four sub-periods (before and after both the global financial crisis and the Arab spring). The results indicate that volatility decreases during the month of Ramadan and is significantly different from the volatility observed in the other 11 months of the Islamic calendar year in most Muslim countries. We also identify that changes in stock returns and volatility during the month of Ramadan are related to religious practice and not due to the global financial crisis or the Arab spring. The findings significantly improve the understanding of the role of religious practice on stock market behavior and as such may be of great interest to investors and market regulators. |
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