Home Business Finance Start of Ramadan Could Signal Substantial Stock Gains

Start of Ramadan Could Signal Substantial Stock Gains

During the month of Ramadan, which starts next week, stock returns are almost nine times higher in predominately Muslim countries than during other times of the year, an indication that Ramadan positively affects investor psychology and leads to optimistic beliefs that extend to investment decisions, according to research from the University of New Hampshire.

The mean annualized return realized by investors during the holy month was 38.09 percent, compared to a rather modest gain of 4.32 percent throughout the rest of the year, according to Ahmad Etebari, professor of finance and chair of the UNH Department of Accounting and Finance.

Observed by more than 1.5 billion Muslims, Ramadan is one of the most celebrated religious rituals in the world. Etebari and his co-researchers investigated stock returns during Ramadan for 14 predominantly Muslim countries over the years 1989-2007: Oman, Turkey, Kuwait, United Arab Emirates, Qatar, Pakistan, Jordan, Egypt, Morocco, Tunisia, Malaysia, Bahrain, Indonesia, and Saudi Arabia.

“We believe that the Ramadan effect can best be explained by a change in investor psychology. Ramadan is a religious month that affects almost every aspect of Muslims’ lives. Besides fasting and prayers, Ramadan promotes heightened social awareness and a closer relationship with Allah and with other fellow Muslims around the world. As a fundamental shared experience, Ramadan brings about a sense of solidarity among Muslims, enhances their satisfaction with life and encourages optimistic beliefs. This optimism affects investor sentiment and decisions leading to the price run-ups we found,” the researchers said.

“Investors seeking fast profits in the Muslim world should try to profit from the fast, buying shares prior to the start of Ramadan and selling them at the end of the holy month or preferably immediately after Eid al-Fitr. Of course, there are transactions costs that one would need to take into account, but any such costs would appear to pale in comparison to the observed returns,” the researchers said.

“Alternatively, investors could embark on a more passive strategy by delaying their sales until the end of the holy month or by accelerating the timing of purchases ahead of it,” they said.

Etebari conducted the research with Jedrzej Bialkowski from the University of Canterbury, Christchurch, New Zealand, and Tomasz Wisniewski from the University of Leicester, Leicester, England.

The UNH Whittemore School of Business and Economics offers a full complement of high-quality programs in business, economics, accounting, finance, marketing, and hospitality management. Programs are offered at the undergraduate, graduate, and executive development levels. The school is accredited by the Association to Advance Collegiate Schools of Business, the premier accrediting agency for business schools worldwide.

Alan Gray is the Publisher and Editor-in-Chief of NewsBlaze Daily News and other online newspapers. He prefers to edit, rather than write, but sometimes an issue rears it’s head and makes him start hammering away on the keyboard.

Content Expertise

Alan has been on the internet since it first started. He loves to use his expertise in content and digital marketing to help businesses grow, through managed content services. After living in the United States for 15 years, he is now in South Australia. To learn more about how Alan can help you with content marketing and managed content services, contact him by email.

Technical Expertise

Alan is also a techie. His father was a British soldier in the 4th Indian Division in WWII, with Sikhs and Gurkhas. He was a sergeant in signals and after that, he was a printer who typeset magazines and books on his linotype machine. Those skills were passed on to Alan and his brothers, who all worked for Telecom Australia, on more advanced signals (communications). After studying electronics, communications, and computing at college, and building and repairing all kinds of electronics, Alan switched to programming and team building and management.

He has a fascination with shooting video footage and video editing, so watch out if he points his Canon 7d in your direction.

Exit mobile version