Credit quality implied momentum profits for Islamic stocks

Paresh Kumar Narayan, Seema Narayan (), Dinh Phan (), Kannan Sivananthan Thuraisamy and Vuong Thao Tran

Pacific-Basin Finance Journal, 2017, vol. 42, issue C, 11-23

Abstract: Using a sample of Asia-Pacific Islamic stocks we show that momentum profits exist regardless of the credit quality of stocks. A portfolio of low credit quality stocks earns 4.68% per annum more than a portfolio of high credit quality stocks. Market risk factors explain all momentum profits, suggesting that profits are compensation for risks. Post-holding period analysis suggests strong evidence of return reversal, consistent with the behavioral hypothesis. Our main results are also robust to sub-samples of data characterized by the recent global financial crisis and to Islamic and non-Islamic based market risk factors.

Keywords: Islamic stocks; Profitability; Risk factors; Portfolio; Mispricing; Abnormal returns (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:42:y:2017:i:c:p:11-23

DOI: 10.1016/j.pacfin.2015.11.004

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