Religiosity vs. well-being effects on investor behavior

Paul-Olivier Klein (paul-olivier.klein@etu.unistra.fr), Rima Turk Ariss and Laurent Weill
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Paul-Olivier Klein: LARGE - Laboratoire de recherche en gestion et économie - UNISTRA - Université de Strasbourg - L'europe en mutation : histoire, droit, économie et identités culturelles - UNISTRA - Université de Strasbourg - CNRS - Centre National de la Recherche Scientifique

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Abstract: Does religiosity impact the trading of securities in financial markets? We separate two channels that could affect investor behavior, disentangling a religiosity effect from a well-being effect. Our original identification strategy compares the stock market reaction to sukuk and bond issuance during the holy month of Ramadan, allowing for a differentiated stock market reaction to the religious component of a trade. Using the event study methodology, we measure abnormal returns for a sample of 2,140 issuances by 133 issuers in Malaysia over the period 2000-2013. While we find evidence for both channels, sukuk issuance during Ramadan is valued more positively than bond issuance by stock market investors. Further, the positive reaction to sukuk issuance during Ramadan only rewards firms which issue sukuk exclusively. Our findings support the view that religiosity influences the behavior of investors, suggesting that this factor should be taken into account in the analysis of financial markets.

Date: 2017-06
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Citations: View citations in EconPapers (10)

Published in Journal of Economic Behavior and Organization, 2017, 138, pp.50-62. ⟨10.1016/j.jebo.2017.04.009⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03053249

DOI: 10.1016/j.jebo.2017.04.009

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