Islamic calendar and stock market behaviour in India
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 7 August 2018
Issue publication date: 15 October 2018
Abstract
Purpose
The purpose of this paper is to examine the behavior of the stock market returns in the different days of the week and different months of the year in accordance with the Islamic calendar. Further, the study estimates the risk-adjusted returns to test the performance of the indices during the Ramadan and non-Ramadan days. Finally, the study investigates the impact of Ramadan on the returns and the volatility of the stock market indices in India.
Design/methodology/approach
Initially, the study applies the Ordinary Least Square method to test the day-of-the-week and the month-of-the-year effect of the common and Shariah indices. Next, the study employs the risk-adjusted measurement to examine the underperformance and over-performance of the indices for both the periods. Finally, the study estimates the GARCH (1,1) and GJR-GARCH (1,1) models to observe the impact of Ramadan on the returns and the volatility of the Shariah indices in India.
Findings
The study finds that an average return of the indices during the Ramadan days are higher than non-Ramadan days. Further, the average returns of the Shariah indices are significantly higher on Wednesday than other days of the week. In addition, the highest and significant mean returns and mean risk-adjusted returns of the indices during the Ramadan days are observed. Finally, the study finds an evidence of the Ramadan effect on the returns and volatility of the indices in India.
Originality/value
The study observes evidence that the Ramadan effect influences the Shariah indices, but not the common indices in the stock market of the non-Muslim countries. It indicates that the Ramadan creates the positive mood and emotions in the investors buying and selling activities. The study suggests that investors can buy the shares before Ramadan period and sell them during the Ramadan days to get an abnormal return in the emerging markets.
Keywords
Acknowledgements
The author of this paper has not made their research data set openly available. Any enquiries regarding the data set can be directed to the author.
Citation
Munusamy, D. (2018), "Islamic calendar and stock market behaviour in India", International Journal of Social Economics, Vol. 45 No. 11, pp. 1550-1566. https://doi.org/10.1108/IJSE-09-2017-0404
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited