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Islamic Finance and Anchoring Heuristic Bias: An Analysis to Gulf Islamic Stock Markets

Mustapha Chaffai () and Imed Medhioub
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Mustapha Chaffai: University of Sfax

No 1422, Working Papers from Economic Research Forum

Abstract: This study explores the importance of the 52-week high price in the Islamic GCC stock market returns. We study the anchoring bias of Muslim investors and the important role of the 52-week high price strategy in predicting future returns in the Islamic GCC stock market returns based on new information. For doing this, we have collected data of Islamic GCC companies listed on all sectors of Islamic GCC stock market. Two methods are employed in this paper. The first, interested to the stock price behavior and by using linear regression models, empirical results show that 52- week high price indicator can be considered as a good anchor which used for the prediction of future returns based on new information. The second analysis is interested to anchoring bias in analysts' forecasts. By using variables related to earning per share (EPS) and EPS forecast we conclude that analysts on the GCC market make biased estimates and they tend to anchor to the historical and industry norms. We obtain a negative impact of POSITIVE variable on error forecast indicating then that analysts are more pessimist

Pages: 20
Date: 2020-11-20, Revised 2020-11-20
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