Impact of Islamic Events on Stock Market: Evidence from Karachi Stock Exchange of Pakistan
[1]
Muazzam Ali, Faculty of Management Science, Lahore Leads University Pakistan, Lahore, Pakistan.
[2]
Shakeel Ahmad Khan, Faculty of Management Science, Lahore Leads University Pakistan, Lahore, Pakistan.
[3]
Abubakar , Faculty of Commerce, Allama Iqbal Open University Pakistan, Islamabad, Pakistan.
Religious belief plays an important role in lives, behavior, and decision making of the people. Religious values and practice have a significant effect on economic growth (Weber 1930). Purpose of this study is to address the impact of Islamic events on stocks. This study sets out to explore this impact in Karachi Stock Exchange of Pakistan. Specifically, it investigates how religious events impact stock market’s trading volume and return around religious holy days in Muslim countries. The study focuses on Islamic events like Eid-ul-Fiter etc. As we know that stock markets of any country plays a vital role in elaborating the economic condition of that country. That’s why this study has great importance in its nature. This study will explore that either stocks gives “Capital Gains” on specific “Islamic Events” to the investors or not. This study will be helpful for investors to take better decision for their investments in stocks on these events. This paper attempts to investigate the impact of Islamic events on stocks in the Karachi Stock Exchange, Pakistan. Islamic events like Eid-ul-Fiter etc. affect the behavior of stock markets in Muslim countries like Pakistan, where the environment on Eid-ul-Fiter is different from whole year because Eid-ul-Fiter is followed by Ramadan, the holy month of fasting, and people give over more time to perform religious ceremony and the general economic activity slows down. So in this study, we will find out: Mean return and stock returns volatility around Eid days. Comparison of both, the return before and after the Eid etc.
Eid-ul-Fiter, Economic Growth, Stock Exchange, Stock Returns, Volatility
[1]
Ahmad, Z. and S. Hussain. 2001. KLSE long run overreaction and the Chinese New Year effect. Journal of Business Finance & Accounting. 28: 1-43.
[2]
Al-Ississ, M, (2010). The impact of Religious experience on financial markets. Harvard University.
[3]
Alper, C. And Aruoba, S. B. (2001), “Deseasonalized Macroeconomic data: a caveat to applied researchers in Turkey”, Istanbul Stock Exchange Review5 (1), 33-52.
[4]
Ariel, Robert A. (1990). High stock returns before holidays: Existence and evidence on possible causes, Journal of Finance 45, No. 5, 1611-1626.
[5]
Brown, S. And K. Taylor, 2010, Social interaction and stock market participation: Evidence from British Panel Data, IZA Discussion Paper, No. 4886.
[6]
Cadsby, C. B. and M. Ratner, 1992, Turn of month and pre-holiday effects on stock returns: Some international evidence, Journal of Banking and Finance16, No. 3, 497-509.
[7]
Chan, M. W. L., A. Khanthavit, and H. Thomas. 1996. Seasonality and cultural influences on four Asian stock markets. Asia Pacific Journal of Management, 13: 1-24.
[8]
Duflo, E. and E. Saez, 2002, Participation in investment decisions in a retirement plan: The influence of colleagues’ choices, Journal of Public Economics 85, No. 1, 121-148.
[9]
Edmans, A., Garcia, D., Norli, O., 2007. Sports sentiment and stock returns. Journal of Finance 62 (4), 1967–1998.
[10]
Frieder, L. and Subrahmanyam, A., (2004). No secular Regularities in Returns and Volume. Financial Analysts Journal, 60(4), pp. 29-34.
[11]
Green, S., 2004. The Development of China’s Stock Market, 1984–2002: Equity Politics and Market Institutions. Routledge, London.
[12]
Hong, H., Kubik, J. D. and J. C. Stein, 2004, Social interaction and stock-market participation, Journal of Finance59, No. 1, 137-163.
[13]
Husain, F. (1998). Seasonality in the Pakistani Equity Market: The Ramadan Effect. The Pakistan Development Review, 1(37), pp. 77-81.
[14]
Johnson, E. J., and Tversky A., (1983). Affect, Generalization, And The Perception Of Risk. Journal of Personality and Social Psychology, 45, pp. 20-31.
[15]
Lee, C. F., G. Yen and C. Chang. 1992. The Chinese New Year, common stock purchasing and cumulative raw returns: Is Taiwan’s stock market informationally efficient? Business Finance in Less Developed Capital Markets. Greenwood Press: Westport.
[16]
Lakonishok, J. and S. Smidt, 1988.Are seasonal anomalies real? A ninety-year perspective, Review of Financial Studies1, No. 4, 403-425.
[17]
McGowan, C. B and Jakob, N. A, 2010. Is There an Eid al-Fitr Effect in Malaysia? International Business & Economics Research Journal, V. 9, No. 4.
[18]
Mustfa, K. (2011). The Islamic Calendar Effect on Karachi Stock Market. Pakistan Business Review, October 2011.
[19]
Nofsinger, J. R., 2005. The Psychology of Investing, 2nd Ed. Pearson Education/Prentice Hall.
[20]
Noland, M, 2004. Religion, Culture, And Economic Performance, Institute for International Economics.
[21]
Prechter, R. R., 1985. Popular culture and the stock market. New classics library. In: Prechter, R. (Ed.), Pioneering Studies in Socionomics. New Classics Library, Gainesville, GA.
[22]
Prechter, R. R., 1999. The Wave Principle of Human Social Behavior and the New Science of Socionomics. New Classics Library, Gainesville, GA.
[23]
Ramezani, A, Pouraghajan, A, Mardani, H, (2013). Impact of Ramadan on Stock Exchange Index: Case of Iran. World of Sciences Journal. ISSN: 2307-3071, V.1: 46-54.
[24]
Seyyed, F., Abraham, A., Al-Hajji, M., (2005). Seasonality in Stock Returns and Volatility: The Ramadan Effect. Research in International Business and Finance, 19(3), pp. 374-383.
[25]
Tong, W. H. S. 1992. An analysis of the January effect of the United States, Taiwan and South Korea stock returns. Asia Pacific Journal of Management. 9: 189-207.
[26]
Weber, M., (1930). The Protestant Ethic And The Spirit of Capitalism (New York: Scribner's).
[27]
Wong, P. L., S. K. Neoh and T. S. Thong. 1990. Seasonality in the Malaysian stock market. Asia Pacific Journal of Management, 7: 43-62.
[28]
Wright, W. F., Bower, G. H., 1992. Mood effects on subjective probability assessment. Organizational Behavior and Human Decision Processes 52, 276–291.
[29]
Yen and Shyy. 1993. Chinese New Year effect in Asian stock markets. Taiwan National University Management Journal. 4: 417-36.
