Fast profits in a fasting month? A markov regime switching approach in search of ramadan effect on stock markets

Faruq Hasbullah and Abul Masih

MPRA Paper from University Library of Munich, Germany

Abstract: Ramadan is deemed to be the holiest month which is observed by 1.6 billion Muslims across the world. We investigate the stock returns during Ramadan for 5 biggest stock markets in Muslim majority countries (Saudi Arabia, Malaysia, Turkey, Indonesia and Kuwait) by taking weekly data over the period of 5 years. By applying the Markov Regime Switching technique we found out that there is not enough evidence to conclude that Ramadan effect plays a significant part in providing investors with higher return during the one-month period. However, we found out that all the stock exchanges move in the same direction during the Ramadan 2012 and Ramadan 2015 which perhaps may be attributed to the Eurozone Crisis and oil price drops. These show that external factors may play a far bigger role in determining the returns from the stock market than a seasonality effect.

Keywords: Ramadan effect; stock markets; markov regime switching (search for similar items in EconPapers)
JEL-codes: C22 C58 G12 (search for similar items in EconPapers)
Date: 2016-06-20
New Economics Papers: this item is included in nep-ara and nep-sea
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