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Religious practices, fasting, and individuals’ trading behavior: a natural experiment

Abdullah M. Al-Awadhi (Insurance and Banking Department, College of Business Studies, PAAET, Safat, Kuwait)
Ahmad Bash (Insurance and Banking Department, College of Business Studies, PAAET, Safat, Kuwait)
Barrak AlGharabali (College of Business Administration, Kuwait University, Kuwait City, Kuwait)
Mohammad Al-Hashel (College of Business Administration, Kuwait University, Kuwait City, Kuwait)
Fouad Jamaani (Department of Economics and Finance, College of Business Administration, Taif University, Taif, Saudi Arabia)

Journal of Islamic Accounting and Business Research

ISSN: 1759-0817

Article publication date: 20 September 2024

37

Abstract

Purpose

This study aims to investigate the effect of seasonality caused by fasting as a religious practice on trading activity.

Design/methodology/approach

The authors use an unbiased sample of daily trading by individuals and institutions on the Boursa Kuwait. The authors use panel data on trading activities and Tobit regression models to examine the effect of Muslims’ religious practice of fasting during the holy month of Ramadan on trading behavior.

Findings

The authors find that during the holy month of Ramadan, Muslims’ religious practice of fasting leads to a decline in the frequency of both overall stock market trading and the ratio of individual trading volume to total trading volume. The authors find a significant decrease in individual buy-side trading as a proportion of total trading volume and simultaneously a significant increase in institutional buy-side trading.

Practical implications

This study’s findings have important implications for the main players in stock markets of countries with a Muslim majority. Market-makers should be aware of the significant increase in the proportion of institutional buy-side trading volume to total trading volume to minimize the cost of trading with better-informed traders (adverse selection).

Originality/value

To the best of the authors’ knowledge, this is the first study that investigates individuals’ trading activity during Ramadan.

Keywords

Acknowledgements

The authors are grateful for helpful comments provided by the journal anonymous referees.

Citation

Al-Awadhi, A.M., Bash, A., AlGharabali, B., Al-Hashel, M. and Jamaani, F. (2024), "Religious practices, fasting, and individuals’ trading behavior: a natural experiment", Journal of Islamic Accounting and Business Research, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JIABR-06-2023-0172

Publisher

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Emerald Publishing Limited

Copyright © 2024, Emerald Publishing Limited

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