Religious practices, fasting, and individuals’ trading behavior: a natural experiment
Journal of Islamic Accounting and Business Research
ISSN: 1759-0817
Article publication date: 20 September 2024
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
:Emerald Publishing Limited
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