mitchell et al - 2014 - omee - conventional vs islamic finance

7212019 Mitchell Et Al - 2014 - OMEE - Conventional vs Islamic Finance

httpslidepdfcomreaderfullmitchell-et-al-2014-omee-conventional-vs-islamic-finance 120

105

Online ISSN 2345-0037 ORGA NIZ AIONS AND MA RKES IN EMERGING ECONO MIES 2014 VOL 5 No 1(9)

CONVENTIONAL VS ISLAMIC FINANCE

THE IMPACT OF RMADANUPON SHAIA983085COMPLIANT MAKETS

Mathew C Michell

Drake University ndash College o Business and Public Administration

Muhamad Iqbal Mohd afi Drake University ndash College o Business and Public Administration

Sean Severe Drake University ndash College o Business and Public Administration

Jeffrey A Kappen Drake University ndash College o Business and Public Administration

Abstract Te Islamic financial industry is growing at a rate 50 aster than that o conventionalbanking and is expected to be worth USD 21 trillion by the end o 2014 Tis rapid growth andinstitutionalization o an alternative financial market highlights a growing need to urther investigateSharia-compliant markets and how they compare with their conventional market counterparts Tis

paper investigates this broad relationship by ocusing on the effects o Ramadan upon the perormanceo Sharia-compliant financial instruments Specifically we utilize an event-study methodology tocompare the perormance o Sharia-compliant stocks to their conventional counterparts across a largesample o countries and regions We find strong evidence or a significant Ramadan effect within

Muslim majority countries and regions Te effect is strongest in the days leading up to Ramadan andalso around the beginning o Ramadanrsquos third Ashra on the 20th day Tis timing reflects the mental

emotional and practical preparations that individuals go through during the course o the month-long observance Tese results are not consistent with traditional economic expectations and thereorereflect the unique socially-embedded nature o this emerging and religiously inspired financial system

Key words Islamic finance Sharia Ramadan event study calendar anomalies

Drake Universiy College o Business and Public Adminisraion Deparmen o Managemen and In-

ernaional Business 2507 Universiy Avenue Des Moines IA 50311-4505 Phone +1 (515) 271-3138e-mail MathewMichellDrakeedu



106

1 Inroducion

ldquo I donrsquot just want London to be a great capital o Islamic finance in the Western world I want London to stand alongside Dubai and Kuala Lumpur as one o the great capitals o

Islamic finance anywhere in the worldrdquo

-David Cameron Briish Prime Miniser Ocober 2013

Te Islamic financial indusry is growing a a rae 50 aser han ha o radiional banking and is expeced o be worh USD 21 rillion in oal invesmen capial byhe end o 2014 (Ghosh 2013) Te quoe above rom he 2013 World Islamic Forumheld in London called global atenion o he rise o Islamic finance as a ransnaionalphenomenon whose reach has begun o exend beyond he Muslim majoriy emergingmarke conex Cameronrsquos announcemen ha he Unied Kingdom may issue sukuk bonds ha are complian wih Sharia (Islamic law) is he firs ime he use o such

financing has been considered by a Wesern counry A he same ime here are hose who doub he easibiliy long-erm poenial and sinceriy o Islamic finance oprosper on a global scale (eg Barnes 2013)

Tis rapid growh and spread o an alernaive financial model calls atenion oa need o invesigae he behavior o Sharia-complian markes and how hey maydiffer rom heir convenional counerpars Jus afer he Prime Miniser made heannouncemen above we had he opporuniy o inerview wo leaders in Islamicfinance rom Malaysia One o he paricipans is an exper rom a prominen universiyand he oher is he CEO o a major bank As hey spoke abou Islam as a holisic lie

sysem ha includes rules or business and finance he quesion o operaions duringhe Islamic holy monh o Ramadan was raised Te universiy proessor said hesuspeced ha he marke would slow down each year during he monh He indicaedha ldquokey decisions would no be maderdquo because ldquosenior decision makers may no be bohered during Ramadanrdquo In conras he bank presiden saed ldquoWe manage moneyor invesorshellip No invesor is going o accep he excuse ha we were ired because weare asingrdquo Tis difference in opinion caugh our atenion

While Islamic business sysems may be becoming more mainsream managemenscholarship hus ar has paid limied atenion o he possible implicaions or financialorganizaions paricipaing in markes whose rules and oundaions may be unamiliaro hem (Micklehwai amp Wooldridge 2009 racey 2012) Differences in religionand resuling socio-culural pracices may be a source o conflic as invesors romdifferen backgrounds paricipae in inernaional invesmen aciviies (Critenden ampCritenden 2010 El-Ansary 2005 McCleary amp Barro 2006) o his end and wih heaoremenioned debae in mind his paper examines he perormance o boh Sharia-complian and convenional capial markes during he Islamic holy monh o RamadanTe sudy includes daa rom boh he emerging markes where Islam is prominen

as well as rom non-Muslim counries wih Islamic sock lisings While our analysessuppor prior findings ha here is indeed a ldquoRamadan Effecrdquo (eg Bialkowski Eebari



107

amp Wisniewski 2012) we highligh ha his effec varies according o he conex in which he rading occurs and wheher or no he sock is complian wih religious law

2 Lieraure eview

Te Islamic finance indusry has seen remendous growh over he las ew decades wihin emerging economies Newly creaed financial insrumens such as Islamic bondsand Islamic morgage (murabaha) are increasingly common offerings in even hemos radiional financial services organizaions In 2008 PriceWaerHouseCoopersesimaed ha his indusry was worh USD 720 billion wih a growh rae o 15-20annually However despie growing ineres in Islamic finance here are very ewempirical sudies ha have invesigaed he perormance o Islamic equiy invesing

An undersanding o he differences beween Islamic and convenional financialpracices is necessary in order o evaluae he possible implicaions o he inerace o beween hese wo models or financial markes El Gamal (2000) summarizes hesedifferences as he prohibiion o usury (ineres) he inabiliy o inves in cerainprohibied indusries he cenraliy o he lsquoreal economyrsquo in invesmen decisions andhe imporance o risk (or gain) sharing in invesmen relaionships under Islam Tesedifferences will be explored in more deail below as hey are refleced in he regulaiono hese financial markes and he imporance o Ramadan However i should be clearha a financial marke ha is no based on ineres and risk migh offer challenges ohose unamiliar wih hese rules

In his paper we invesigae how invesors and markes may respond o he monh-long se o observances and riuals ha consiue he holy monh o Ramadan Terehave been sudies in finance on calendar anomalies such as he January effec (Haugenamp Lakonishok 1987) he Weekend effec (French 1980) and he urn o he Monheffec (Cadsby amp Raner 1992) Te exising lieraure also includes invesigaions ocerain ehnic and religious esivals such as Chinese New Year he Jewish High HolyDays o Rosh Hashanah and Yom Kippur and S Parickrsquos Day (Cadsby amp Raner 1992Chan Khanhavi amp Tomas 1996 Frieder amp Subrahmanyam 2004) Following inhis radiion his paper examines Sharia-complian sock perormance during he holy

monh o Ramadan he ninh monh o he Islamic calendar Tis calendar also knownas he Hijri calendar conains 12 monhs ha are based on he moion o he moon andonly has 354 days per year compared o 365 days in Gregorian calendar According oIslamic principles during he 30 days o Ramadan Muslims mus absain rom eaingdrinking and sensual pleasures rom sunrise unil sunse Apar rom conrolling hesedesires Muslims are also encouraged o read he Islamic holy book Te Quran operorm exra prayers o srenghen he bonds among amily and riends and o rerainrom doing evil

Concepually he poenial impac o Ramadan upon financial markes may

be atribued o is effec on invesorsrsquo reasoning and emoional sae during hisobservan period Previous sudies conduced wihin Muslim majoriy counries have



108

demonsraed ha general sock reurns are significanly higher during he Ramadanperiod (Bialkowski e al 2012 Al-Khazali 2014) Tese auhors argue ha Ramadanpromoes heighened social awareness and a closer relaionship o Allah (God) and wih oher Muslims hus encouraging opimisic belies Inense religious observanceduring Ramadan leads o an increase in perceived social suppor and happiness amonghe observan Tis combinaion o psychological acors may affec invesor senimenand decision-making hereby leading o price run-ups Furhermore oher sudies alsoshow a significan decline in volailiy (Seyyed Abraham amp Al-Hajji 2005 Husain1998) As one example researchers have ound ha loan deauls and oher negaiveeconomic acions are less likely o occur during he holy monh (Baele Farooq ampOngena 2012)

However all o hese sudies have employed simple mehodologies wih limiedsamples and ocused only on he perormance o he general sock marke during he

enire monh o Ramadan wihou examining he hree disinc 10-day phases ( Ashras)o he religious observance Furhermore no previous sudy has differeniaed beweenhe convenional marke and he growing Sharia-complian Islamic financial markeTis paper exends his body o research by employing a sophisicaed even-sudymehodology wih a much larger sample o compare Sharia-complian socks oheir convenional marke counerpars in daily ime incremens beore during andafer Ramadan Using an even-sudy analysis allows us o invesigae daily markemovemens during he hree Ashras o Ramadan which include Ashra 1ndashTe Dayso Mercy (Rahmat ) Ashra 2ndashTe Days o Forgiveness ( Maghfirat ) and Ashra 3ndash

Te Days o Salvaion ( Nijaat ) Each o hese Ashras is caegorized by a unique seo remembrances requiremens challenges emoions and opporuniies Previoussudies have reaed Ramadan as a single calendar even which ails o recognize heembedded rhyhms o he monh-long religious observance

Islamic finance ollows Islamic (Sharia) law where money canno creae or producemore money I sricly acs as a medium o exchange or soring value bu no or hegoal o making excessive profi As a resul invesors canno earn ineres (ribarsquo) onmoney hey lend nor be required o pay i on money hey owe (El Gamal 2000) Tisis significanly differen rom convenional finance where ineres is an undamenaloperaing principal Islamic principles also mandae ha any financial aciviies areree rom ambiguiy (gharar) and speculaion or gambling (maysir) Tus Islamicfinance prohibis any ransacions ha have a high degree o uncerainy regarding heconen or oucome Tereore he rading o uures warrans opions and shor-selling is prohibied as i involves speculaive aciviies wih significan uncerainy(Ayub 2009) In comparison convenional finance has incorporaed ambiguiy as aorm o risk and invesors are rewarded based on amoun o risk hey are willing o akeTus he more ambiguous he ransacion he higher he reurn invesors mus expec

Anoher difference is ha Islamic finance prohibis any invesmens in non-produciveor poenially harmul aciviies such invesmen in pork alcohol fire arms adul



109

enerainmen or gambling indusry (El Gamal 2000) Finally Islamic finance operaes based upon risk (profi or loss) sharing Since ineres is prohibied suppliers o unds become invesors raher han crediors and debors are replaced by enrepreneurs Teinvesor and he enrepreneur will hen share business risk in reurn or shares o profisand losses (Iqbal amp Mirakhor 2011) Conversely crediors in convenional finance

do no necessarily share business risk wih debors Crediors receive a fixed reurnregardless o he deborrsquos business perormance

Sharia-compliant financial instruments

Sharia-complian securiies are an emergen and increasingly imporan caegory wihinIslamic Finance ha gives Muslims he opporuniy o inves in producs ha conormo religious requiremens Sharia-complian bonds (sukuk) Islamic insurance (takaul)and Islamic conracs (ijarah) are all religiously sancioned financial insrumens ha

have been hisorically available o he worldrsquos Muslims however Sharia-compliansocks and indicies are a relaively new orm o ehical invesmen opporuniy Tesesecuriies are seleced using a negaive screening process o exclude specific indusriesor companies Furhermore Sharia-complian socks also have o undergo addiionalreligious esing o ensure ha he socks ollow Sharia rules and principles Forexample Sharia-complian firms mus no be engaged in convenional banking orany oher ineres-relaed aciviies ha uilize convenional lending or brokerages Addiionally hey mus no be in businesses relaing o non-producive and poeniallyharmul aciviies as menion above (El Gamal 2000)

Te screening process done by members o he Sharia board o Islamic scholarsinvolves wo sages he indusry es and he financial ess Te indusry es isinended o remove corporaions ha are involved in prohibied (haram) indusries while he second screening is based on financial raios inended o remove corporaions based on deb and ineres income levels (Dow Jones 2013) Companies ha generaeineres income or incur ineres expense below cerain benchmarks are classified ascomplian bu he ineres-earned income ribarsquo needs o be quanified and purified by disribuing i o suiable chariies Te Sharia board may also esablish a chariableund or cleaning purposes (Delorenzo 2000)

All o hese acors help aciliae growing Muslim demand o inves in accordance wih heir religious observances Tis is all he more imporan considering Muslimsrepresen nearly a quarer o he worldrsquos populaion Tis communiy includes manyfirs ime invesors poenially ineresed in Sharia-complian socks as well as ohers who have invesed in he unds and will likely inves more Tis as-expanding base oinvesors consiss o hree main groups firs he exising markes which include heGul Cooperaion Council (GCC) Counries (Bahrain Kuwai Oman Qaar Saudi Arabia and he Unied Arab Emiraes) and Malaysia second counries wih large

Muslim populaions such as Indonesia Pakisan and India and finally developedmarke counries wih small and wealhy Muslim populaions such as US and Europe



110

(PWC 2008) Beyond populaion and demographic measures he remendous growho Sharia-complian indices around he world shows ha here is an increasing demandor such unds

3 Daa and Mehods Data Collection

We colleced daily closing price and volume daa or he seleced indices hrough heBloomberg daabase Tese indices are characerized ino wo broad caegories TeldquoRegional Indicesrdquo and he ldquoCounry Indicesrdquo where he ldquoRegional Indicesrdquo represen aspecific region while he later represen specific counries We hen divided he ldquoCounryIndicesrdquo ino wo caegories ldquoTe Muslim Majoriy Counriesrdquo and ldquoTe Non-MuslimMajoriy Counriesrdquo We defined Muslim majoriy counries as counries wih a Muslim

populaion o a leas 60 o he counryrsquos oal populaion o be included a counryalso had o have a leas one Sharia- Complian index and a convenional index wih aleas five years o daa Addiionally boh he Sharia-complian index and convenionalindex had o be denominaed in a local currency or comparison Counries ha did nomee hese crieria were dropped As or regional indices we only used he Pan Arabregion as i was he only region wih a composie index and an overall Muslim majoriyin all paricipaing counries Figure 1 illusraes how he daa se was srucured

FIGURE 1 Map of Index Hierarchy Used In Daa Collecion

Each counry and region has only one convenional index bu may have mulipleSharia-complian sock indices We used he Morgan Sanley Capial Inernaional(MSCI) Counry Index and MSCI Regional Index as he benchmark or ourconvenional index Tese MSCI indices are widely used boh in pracice and wihin

he financial lieraure (Hau Massa amp Peress 2010 Darra Li Liu amp Su 2011)able 1 shows he indices included in he daase



111

ABLE 1 Lis of Muslim Majoriy Non-Muslim and egional Indices

In order o invesigae a possible Ramadan effec we firs convered our daa romhe Gregorian calendar o he Islamic calendar We used he official Ramadan sarand end imes published by he Malaysian Deparmen o Islamic Developmen or allo our indices given is prominen role in he regulaion o Islamic Finance worldwide(JAKIM 2013)



112

Event Study Methodology

o achieve our objecive o sudying he idiosyncraic rhyhms o Ramadan we neededa mehodology ha allowed us o observe daily marke movemens An even sudymehodology ocuses on he abnormal reurn o sock prices on days around an even

(ie 2013 Ramadan in Saudi Arabia) and hen averages abnormal reurns by day acrossmuliple evens Tereore his mehodology allows us o analyze he effec o he firsday o Ramadan or each year counry and index

For even i o all I oal evens he abnormal reurn or ime can be expressed as AR i and is some componen o he indicesrsquo acual reurn R i or he daily percen changein an indicesrsquo price Averaging all abnormal reurns across evens or each individual around an even gives he average abnormal reurn or an even or ime Tus = 0or he day Ramadan begins = 1 or he firs day o Ramadan and = minus1 or he day beore Ramadan begins Even sudies are conduced over an even window or ime

preceding and proceeding an even where index prices capure he even during heeven window I he even window spans rom 1 days preceding he even o 2 daysollowing he even hen he even window spans = 2 minus 1 + 1 days oal Te even window is inended o capure any abnormal deviaions rom an even o esimaeabnormal reurns a normal reurn mus be esimaed Tis involves using an esimaion window immediaely preceding he even window ha does no capure a sock price variaion due o an even Te esimaion window runs rom 0 o 1 minus j days beorean even where j is a leas one o ensure he even window and esimaion window dono overlap Te esimaion window is hen es = 1 minus j minus 0 + 1 days long For our

analysis we uilized our differen esimaion windows ranging rom one o our monhsprior o Ramadan o reduce he poenial or error due o growh differences counrydifferences or some oher unobserved yearly difference Te use o differen esimaion windows only srenghens he robusness o our resuls1

Esimaing abnormal reurns involves esimaing a normal sock reurn which is heexpeced reurn i eiher he even did no occur or he sock did no reac o an even An abnormal reurn is hen he difference o a sockrsquos acual reurn minus he expecednormal reurn his may be eiher posiive (he sock perormed beter han prediced)

or negaive We use wo common mehods o calculae expeced normal reurns Tefirs is he mean reurns mehod where he expeced reurn is average reurn o a sockduring he esimaion window preceding he even or

(1)sum=

= jT

T t

it

est

N

i

N

it RT

R= R ndash 1

0

1

where N

it R is he normal reurn or he sock used in even i and is ime invarian Tis

mehod compares each sock index o isel pre- and pos- Ramadan Tese resuls arelised as Sharia-Compliant Stock Indices and Conventional Stock Indices in ables 2 3 and 4

1 See Mackinlay (1997) or a horough descripion o using and perorming even sudies in economics



113

Te second mehod or calculaing he expeced normal reurn is a mulivariaeregression marke model oulined in Fama Fisher Jensen and Roll (1969) A regressionis run or all separae evens o find how a Sharia-complian index reurns are a unciono he marke reurns or convenional (non-Sharia index) reurns in our case Teexpeced normal reurn is hen

(2)M

t ii

N

it R= R

andand

+ β α

where M

t R is he convenional marke reurn and i

and

α and i

and

β are he esimaed OLScoefficiens by regressing he sock reurn o Sharia-Complian index in Ramadan-yeari on he convenional marke reurn during he esimaion window Te coefficiensexplain how he Sharia-complian index moves wih he convenional index during

normal imes Tis relaionship is hen exrapolaed o predic normal reurns duringRamadan Tis mehod compares no only an index pre- and pos-Ramadan bu alsocompares a Sharia-complian index o a convenional index Tese resuls are lised asSharia-Compliant amp Conventional Stock Indices Comparison in ables 2 3 and 4

Abnormal reurns are hen esimaed o be he difference o he acual reurn orsock i a ime minus he expeced normal reurn or he sock a ha ime Moreormally

sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)

Afer each abnormal reurn is calculaed he average abnormal reurn AAR iscalculaed as he mean o AR i across all I evens or

sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)

where AAR is esed o be significan using es saisics derived by he square roo o VAR(AAR) Te average abnormal reurn gives insigh i here is any single day duringRamadan where all indices experience significan abnormal reurns

Te parameric esimaion o abnormal reurns rom Equaion (4) assumes a normaldisribuion o abnormal reurns which has been shown o be very sric when usingdaily sock prices As an alernaive wo nonparameric ess are commonly used o



114

veriy he resuls rom he parameric ess Te rank es and he sign es or abnormalreurns are assumpion-ree abou he disribuion o sock reurns and are used as arobusness check or Equaion (4)

Te rank es was firs proposed by Corrado (1989) and ess he wheher heaverage rank o all abnormal reurns a ime is significanly differen han he null

hypohesis o he middle given here are no abnormal reurns I involves creaing aranking order o abnormal reurns across ime or all N evens I he even window is = 2 minus 1 + 1 days long we creae a ranking sysem or each even ranging rom 1o wih 1 being he lowes abnormal reurn in he even window or ha even and being he larges abnormal reurn or ha even We define K i as ha rank or even i aime Te es saisic a ime or he rank es θ

Rank is normally disribued and isexpressed as

θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s

Te sign es is based on he sign o he abnormal reurn and assumes under he nullhypohesis o no abnormal reurns ha a negaive abnormal reurn is no more likely

han a posiive abnormal reurn or any given even Tis es examines i he proporiono negaive abnormal reurns o posiive abnormal reurns is significanly differen hanone-o-one he expeced proporion under he null hypohesis o no abnormal reurnsTe es saisic a ime or he sign es θ

Sign is normally disribued asympoicallyand can be writen as in Equaion (6) below Te resuls rom he sign es are lised inhe column PosNeg in ables 2 3 and 4 and are given by he coun o negaiveposiiveabnormal reurns wih sars or significance assigned using he es saisic rom hesign es given by

θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS

Lasly Doukas and ravlos (1988) ouline a ype-I error es o deermine i henumber o significan posiive or negaive abnormal reurns is larger han he expecednumber o significan reurns expeced by a ype-I error In his case we es i he



115

number o significan posiive (negaive) abnormal reurns differs han he expecednumber i here are no abnormal reurns presen since a ype-I error is alsely rejecinghe null hypohesis o no abnormal reurns when he null hypohesis is indeed correcTe ype-I error es saisic is given in Equaion (7) below and can be ound in hecolumn PosNeg in ables 2 3 and 4 Tis column in hese ables gives he coun o

negaive and posiive significan abnormal reurns (a a 95 confidence level) and eachcoun is assigned sars or significance using he ype-I error es saisic calculaed as

r qq

qr s Z t

) ndash 1(

ndash = (7)

where q is he probabiliy o a ype I error (005) s is he number o saisically

significan posiive negaive abnormal reurns a he 95 level and r is he oalnumber o abnormal reurnsTereore he even sudy mehodology allows us several unique ools we can use

o analyze he embedded rhyhms o Ramadan Firs o all we can analyze he averageabnormal reurns by day relaive o he sar o Ramadan Tis means ha we are ableo look a all index reurns across all naional and regional conexs (Muslim majoriycounries Pan Arab Region and non-Muslim majoriy counries) by day o deerminehe precise movemens o he markes in response o he differen phases o aciviy(pre-Ramadan Phase-1 Phase-2 Phase-3 and pos-Ramadan) Tis is an imporan

advancemen in our abiliy o undersand he impac o Ramadan which is no asingle-day even bu which encompasses more han an enire monh Second we canalso esimae he direcion o he marke using he rank es and he sign es Teseanalyical ools allow us o invesigae he posiive or negaive daily movemen o hemarke in response o hese differen phases Furhermore he robusness o ess weconduc are mean o eliminae any possibiliy o bias one es or anoher may conain Average abnormal reurns he rank es and he sign es are conduced over he eniresample o Ramadan-years o preven any possibiliy o a single Ramadan having anunobserved even While somehing unobserved and unaccouned or in he daa

may occur during a single Ramadan ha may cause abnormal reurns o be observedhis is very unlikely o happen during all o he years and would be considered whienoise ha cancels ou o zero when averaging over all Ramadan-years and over severalcounries

I should also be noed ha while cumulaive abnormal reurns are also ypicallyused in even sudy mehodology our heoreical oundaions sugges ha ceraindays or periods o Ramadan yield differen marke oucomes Cumulaive abnormalreurns which rack he cumulaive effec o an even over several days cannodisinguish individual daily effecs as do abnormal reurns As such we do no includehe cumulaive abnormal reurns in his paper bu hey can be provided upon reques



116

4 esuls and Discussion

I has been esablished ha Ramadan is a significan religious and culural observanceha affecs he reurns and volailiy o markes in comparison o oher monhs o he year Our resuls sugges a more complex phenomenon ha is composed o disinc

periods o significan aciviy hroughou he monh-long religious observance Tesedisinc phases may correspond wih differen phases during he monh o Ramadan We will firs presen he resuls rom he Muslim majoriy counries beore moving ohe resuls rom he Pan Arab region and he non-Muslim majoriy counries Wihineach secion we will discuss he significan findings and rends and hen presen aninerpreaion o he findings We conclude wih a discussion o conribuions anduure direcions

Muslim Majority Countries

Te resul ha becomes immediaely apparen rom he daa is ha here is indeed aRamadan effec or all ypes o invesmens (convenional and Sharia-complian) aspreviously demonsraed However by using he even sudy mehodology we findhe effec occurs a disinc phases wihin he monh o Ramadan or differen ypeso financial insrumens (ie Sharia-complian vs convenional) In conras o ohersudies ha only examine he effecs o he enire monh we find srong evidence duringRamandan or negaive average abnormal reurns (AARs) around he beginning oRamadan and posiive AARs during he later phases o Ramadan Due o he naure ohe non-normal disribuion o daily reurns as described above an insignifican AAR-sa is very likely bu he Rank -sa he sign es and he ype-I error es are alsoall imporan indicaors or emerging rends aken ogeher hese ess provide srongevidence abou he perormance o he indices in comparison o he expecaionso prediced models generaed by using our esimaion windows o one wo hreeand our monhs prior o Ramadan (See able 2) Te examinaion period consisso one week preceding Ramadan o one week immediaely afer Ramadan in order oexamine he ull scope o a poenial Ramadan effec Tis six week examinaion periodcovers he week ahead o Ramadan when individuals prepare or he monh-long

observance he ime during Ramadan and he week immediaely ollowing Ramadan which includes celebraions or successully compleing he monh o asing ie Eidal-Fir While resuls rom all our esimaion windows are provided o demonsraerobusness we will only uilize he firs monh-long esimaion window (denoed -38o -8) in our analysis going orward Complee daily resuls or his ime period areprovided or reerence in Appendix A

Among Muslim majoriy counries he Sharia-Complian sock indices daa showedsrong evidence or a downurn in he days leading up o Ramadan wih he fifh day beore he sar o Ramadan (day = -5) showing a srongly negaive rank -sa (p lt 05)

sign es (p lt 01) and ype-I error es (p lt 01) Te convenional sock indices alsoshow srong evidence or a pre-Ramadan downurn wih he hird day beore he sar



117

o Ramadan (day = -3) Te paricular heoreical significance o hese days canno be deermined wih he curren daa bu i is worh noing ha he Sharia-Compliansock indices end o lead he convenional indices hroughou he enire daa seOne poenial explanaion is ha he Sharia-Complian socks are preerred by morereligiously observan invesors who make earlier preparaions or Ramadan

In Muslim majoriy counries he rebound in hese sock indices occurred aroundhe ransiion beween he second phase (Te Days o Forgiveness) and hird phase(Te Days o Salvaion) o he monh Te Sharia-complian and convenional sockindices show a disincly posiive rend during his ransiion period wih he Sharia-complian indices responding hree days earlier han he convenional indices (he 18h day o Ramadan vs he 21s day) Te firs phase ( Ashra) o Ramadan is characerized

ABLE 2 Muslim Majoriy Counries Sharia-Complian Convenional amp Comparison esuls



118

by a ocus on he mercy o Allah During he second Ashra Muslims are encouraged oseek he orgiveness o heir sins Finally during he hird and final Ashra o RamadanMuslims seek he reuge and salvaion ha comes rom Allah Te holies o nighsknown as Laylat al-Qadr or he Nigh o Power which Muslims believe occurs on anodd number nigh during his hird and final Ashra Tis nigh commemoraes he

firs revelaion o he Quran o Muhammad and is regarded as lsquomore imporan han1000 monhsrsquo Tereore many Muslims srive o be especially observan during hefinal Ashra so ha heir supplicaions and veneraions will be increased Tis ransiion beween hese disinc periods may explain he rhyhms we see in he sock markedaa bu i is imporan o reierae ha his sudy canno offer conclusive evidence orhis hypohesis Furher research ino he specific naure o invesor behavior duringhese phases is needed

Te final secion o able 2 presens he resuls rom a comparison o he convenional

and Sharia-complian sock indices Te movemen o he wo indices are recordedduring he esimaion window and a model is generaed o predic he Sharia-complianreurns based on he ongoing saisical relaionship beween he Sharia-complian andconvenional indices We used his conservaive es as anoher robusness check orhe presence o he Ramadan effec wihin he Sharia-complian securiies Basically ihe Ramadan effec is presen in he convenional sock indicesrsquo daa i would be evenmore difficul o deec i in he comparison es However even wih his conservaivees we coninue o see negaive resuls or he days immediaely surrounding he saro Ramadan as indicaed by he significan resuls or day = -1 and 3 boh a he p lt 05

level or he rank -sa and he sign es Tis indicaes ha he Ramadan effec affecshe Sharia-complian sock indices even more han he convenional marke indices

Pan Arab Region

Te resuls rom he Pan Arab region mirror and confirm hose rom he Muslimmajoriy counries or he Sharia-complian markes (See able 3) Specifically wefind he Sharia-Complian sock indicesrsquo daa shows srong evidence or a downurnin he days around he sar o Ramadan wih he days = -2 and +2 displaying srongand significan negaive rends Tese early negaive rends in he marke may suggesha individuals are preparing or he long observance by selling socks o generaeliquidiy or he days ahead Te marke clearly reverses he downward rend by he22nd and 24h days afer he beginning o Ramadan Tis reversal may be atribuableo he beter social mood and expecaion ha comes wih Laylat al-Qadr and hehird Ashra o Salvaion We believe hese rends would also hold or he convenionalmarke indices bu we were unable o confirm his expecaion due o missing daa inhe regional convenional sock indices

I is worh noing ha hese inerpreaions are also dependen upon he raio o

reail o insiuional invesors in he marke which is currenly unknown In ourpreliminary inerviews he bank presiden indicaed ha insiuional invesors ldquoare no



119

even aware here is a Ramadan monhrdquo because here are auomaed rading algorihmsha rigger cerain rades a pre-defined prices Tis would cerainly dilue he effeco Ramadan i here were a high proporion o insiuional invesors in he markeHowever our resuls demonsrae a srong and persisen Ramadan Effec which mayindicae ha here is a large enough proporion o reail invesors ha are influenced by

he rhyhms o Ramadan

ABLE 3 Pan Arab egion Sharia-Complian and Comparison esuls



120

Te final secion o able 3 shows he resuls o he comparison beween he Sharia-complian and convenional markes Tis conservaive es also subsaniaes earlierresuls ha indicae ha Sharia-complian sock indices are even more sensiive o heRamadan Effec han convenional sock indices Tis is evidenced by he significanand negaive resuls on he days = -2 0 and +16 Tis negaive rend reverses isel afer

he ransiion ino he Ashra o Salvaion and by he 24h day we see srong indicaionso a marke ha exceeds he expecaions o he prediced model as indicaed by asignifican ranked -sa (p lt 05) and he combinaion o he sign es and he ype-Ierror es (p lt 01)

Non-Muslim Majority Countries

Te resuls rom he non-Muslim majoriy counries do no ollow he dominanrends ha were oulined in he previous wo Muslim majoriy and Pan Arab region

conexs o begin he Sharia complian sock indices did no show any effec ha was associaed wih he sar o Ramadan or he ransiion o he hird Ashra Te onlyday ha generaed significan resuls was he 32nd day afer Ramadan began which iswo days afer Ramadan ends I is hereore difficul o atribue his significan resulo a Ramadan Effec or non-Muslim majoriy counries One possible explanaioncould be he generally posiive resuls are relaed o celebraion o Eid al-Fir howeverhis inerpreaion would be much more plausible in Muslim majoriy counries Alernaively he resul may reflec he increasingly globalized naure o Islamicfinance For example i invesors rom emerging marke Muslim majoriy counries

wan o inves in Sharia-complian securiies in developed naions hen here may be asignifican share o ownership o locally lised Sharia-complian socks in non-Muslimcounries However as previously noed i should be clear ha his sudy is clearly noable o answer hese quesions bu simply pose hem as possible inerpreaions hashould be invesigaed in he uure wih he appropriae se o daa and mehodologies

Te inerpreaion o he final wo resuls rom he convenional sock indicesand he Sharia and convenional indices is problemaic According o our heoreicalperspecive and assumpions we should have very litle expecaion o finding a disincand consisen Ramadan effec in his naional and religious conex Te resuls romhe convenional sock indices analysis confirm his expecaion Tere were wo daysha are repored o be significan (12h and 24h) bu hey are generally ou o phase wih he Ramadan Effec ha has been proposed in he lieraure and urher supporedin his paper Furhermore he comparison beween he convenional and sharia-complian indices yields mosly weak and inconsisen resuls ha indicae he lack osuppor or a Ramadan Effec in his religious and naional conex However heone resul rom his secion ha is reliable and noeworhy is he srong response onhe 34h day afer Ramadan Tis resul indicaes ha Sharia-complian sock indices

ha are lised in non-Muslim counries have a moderaely significan (Rank -sa isp lt 05) and posiive response (sign es and ype-I error es is significan a p lt 05 and



121

p lt 01 respecively) our days afer Ramadan ends Since his is a comparison es his would indicae ha Sharia-complian socks ouperormed heir expecaions vis-agrave-vis

convenional socks in he days afer Ramadan

Conribuions and Fuure Direcions

Tis paper makes several conribuions o he lieraure Firs i complemens prior workon Ramadan in ha i akes a fine-grained approach including inormaion colleceddaily raher han or whole monh Furhermore i is also he firs o differeniae beween socks ha are complian wih Sharia law and non-complian socks ha may be raded in Islamic counries Finally we have sough o quaniaively analyze and

undersand he Ramadan Effec as a phenomenon ha is embedded wihin a veryspecific culural naional and religious conex

ABLE 4 Non-Muslim Majoriy Counries Sharia-Complian Convenional amp Comparison



122

Tere are several limiaions ha relae direcly o areas or uure research Firsi would be useul o conduc primary research among raders and oher paricipansin hese financial markes o gain insigh ino how hey make decisions abou radingaround Ramadan While we have heorized ha piey may be an explanaory variablehe daa colleced do no allow us o make a definiive claim Second as Islamic Finance

becomes more prevalen ouside he radiional Muslim world will he effec remainor will he efficiency o he marke inroduce a sae o equilibrium Finally he evensudy mehodology could be applied o oher holiday periods o look or similarrhyhms in invesor behavior

In conclusion Islam provides Muslims wih rules or how hey mus conduc businessas well as oher affairs in heir daily lives As hese commercial pracices spread beyondhe radiional borders o he Muslim world here is a more urgen need or researcho bridge he gap in undersanding beween conexs Tis projec has expanded our

knowledge o he marke effecs emanaing rom a major religious holiday As Islamicfinance coninues is global expansion more research will need o ocus on is ineraceand possible influence on oher models or organizing and governing financial markes

eferences

Al-Khazali O (2014) Revisiing as profi invesor and sock reurns during Ramadan International Review o Financial Analysis 32(1)

Ayub M (2009) Understanding Islamic Finance New Jersey John Wiley and SonsBaele L Farooq M Ongena S (2012) O religion and redemption Evidence fom deault on

Islamic loans Working Paper ilburg Universiy June 2012Barnes W (2013) Islamic finance sits awkwardly in a modern business school Rerieved February 5

2014 rom wwwfcomcmss2ee2a2b36-9de5-11e2-9ccc-00144 eabdc0hmlaxzz2wpF7EIecBialkowski J Eebari A amp Wisniewski P (2012) Fas profis Invesor senimen and sock

reurns during Ramadan Journal o Banking amp Finance 36(3) 835-845Cadsby CB amp Raner M (1992) urn-o-monh and pre-holiday effecs on sock reurns

Some inernaional evidence Journal o Banking amp Finance 16(3) 497-509ChanM Khanhavi A amp Tomas H (1996) Seasonaliy and culural influence on our Asian

sock markes Asia Pacific Journal o Management 13(2) 1-24Corrado C (1989) A nonparameric es or abnormal securiy-price perormance in even

sudies Journal o Financial Economics 23(2) 385-395Critenden VL amp Critenden WF (2010) Sraegic managemen in emerging economies A

research agenda Organizations and Markets in Emerging Economies 1(1) 9-23Darra A F Li B Liu B amp Su J J (2011) A Fresh Look a Seasonal Anomalies An

Inernaional Perspecive International Journal o Business amp Economics 10(2)Delorenzo Y (2000) Sharia Supervision o Islamic Muual Funds Proceedings o the Fourth

Harvard University Forum on Islamic Finance Islamic Finance Te ask Ahead Center or Middle Eastern Studies Harvard University 2000 Cambridge Massachusets 67-75

Deparmen o Islamic Developmen Malaysia ndash JAKIM (2013) akwim Rerieved December19 2013 rom wwwislamgovmyennode26745

Doukas J amp ravlos N G (1988) Te effec o corporae mulinaionalism on shareholdersrsquo wealh Evidence rom inernaional acquisiions Te Journal o Finance 43(5) 1161-1175



123

Dow Jones (2013) Guide o he Dow Jones Islamic Marke Indices Rerieved Sepember 092013 rom wwwdjindexescommdsidxdownloadsrulebooks

El-Ansary W (2005) Te Quantum Enigma and Islamic Sciences o Nature Implications or Islamic Economic Teory Paper presened a he 6h Inernaional Conerence on Islamic Economics Jeddah

El-Gamal MA (2000) A basic guide to contemporary Islamic banking and finance (Vol 1)

Houson Rice UniversiyFama EF FisherL Jensen M amp Roll R (1969) Te adjusmen o sock prices o newinormaion International Economic Review 10(1) 1-21

French KR (1980) Sock reurns and he weekend effec Journal o Financial Economics 8(1)55-69

FriederL amp Subrahmanyam A (2004) Nonsecular regulariies in reurns and volumeFinancial Analyst Journal 29-34

FSE (2013) FSE Bursa Malaysia Index Series Rerieved Sepember 10 2013 rom wwwfsecomIndicesFSE_Bursa_Malaysia_Index_Seriesindexjsp

Ghosh PR (2013) Letrsquos Make London A Center o Global Islamic Finance David Cameron Rerieved March 17 2014 rom wwwibimescomles-make-london-cener-global-islamic-finance-david-cameron-1446600

Hau H Massa M amp Peress J (2010) Do demand curves or currencies slope down Evidencerom he MSCI global index change Review o Financial Studies 23(4) 1681-1717

Haugen R amp Lakonishok J (1987) Te incredible January effect Te stock marketrsquos unsolvedmystery Dow Jones-Irwin

Husain F (1998) A seasonaliy in he Pakisani equiy marke Te Ramadhan effec Te Pakistan Development Review 77-81

Iqbal Z amp Mirakhor A (2011) An Introduction to Islamic Finance Teory and PracticeSingapore John Wiley and Sons (Asia)

Mackinlay AC (1997) Even sudies in economics and finance Journal o Economic Literature 35(1)13-39

McCleary R M amp Barro R J (2006) Religion and economy Journal o Economic Perspectives20(2) 49-72

Micklehwai J amp Wooldridge A (2009) God is Back How the Global Revival o Faith isChanging the World New York Penguin Press

PriceWaerHouseCoopers (2008) Shariah-complian unds A whole new world o invesmenRerieved Sepember 10 2013 rom wwwpwccomgxenfinancial-services

racey P (2012) Religion and Organizaion A Criical Review o Curren rends and FuureDirecions Academy o Management Annals 6 87-134

Seyyed F Abraham A amp Al-Hajji M (2005) Seasonaliy in sock reurns and volailiyResearch in International Business and Finance 19(3) 374-383



124

APPENDIX A Muslim Majoriy Counries Sharia-Complian Sock Indices Daily esuls



106

1 Inroducion

ldquo I donrsquot just want London to be a great capital o Islamic finance in the Western world I want London to stand alongside Dubai and Kuala Lumpur as one o the great capitals o

Islamic finance anywhere in the worldrdquo

-David Cameron Briish Prime Miniser Ocober 2013

Te Islamic financial indusry is growing a a rae 50 aser han ha o radiional banking and is expeced o be worh USD 21 rillion in oal invesmen capial byhe end o 2014 (Ghosh 2013) Te quoe above rom he 2013 World Islamic Forumheld in London called global atenion o he rise o Islamic finance as a ransnaionalphenomenon whose reach has begun o exend beyond he Muslim majoriy emergingmarke conex Cameronrsquos announcemen ha he Unied Kingdom may issue sukuk bonds ha are complian wih Sharia (Islamic law) is he firs ime he use o such

financing has been considered by a Wesern counry A he same ime here are hose who doub he easibiliy long-erm poenial and sinceriy o Islamic finance oprosper on a global scale (eg Barnes 2013)

Tis rapid growh and spread o an alernaive financial model calls atenion oa need o invesigae he behavior o Sharia-complian markes and how hey maydiffer rom heir convenional counerpars Jus afer he Prime Miniser made heannouncemen above we had he opporuniy o inerview wo leaders in Islamicfinance rom Malaysia One o he paricipans is an exper rom a prominen universiyand he oher is he CEO o a major bank As hey spoke abou Islam as a holisic lie

sysem ha includes rules or business and finance he quesion o operaions duringhe Islamic holy monh o Ramadan was raised Te universiy proessor said hesuspeced ha he marke would slow down each year during he monh He indicaedha ldquokey decisions would no be maderdquo because ldquosenior decision makers may no be bohered during Ramadanrdquo In conras he bank presiden saed ldquoWe manage moneyor invesorshellip No invesor is going o accep he excuse ha we were ired because weare asingrdquo Tis difference in opinion caugh our atenion

While Islamic business sysems may be becoming more mainsream managemenscholarship hus ar has paid limied atenion o he possible implicaions or financialorganizaions paricipaing in markes whose rules and oundaions may be unamiliaro hem (Micklehwai amp Wooldridge 2009 racey 2012) Differences in religionand resuling socio-culural pracices may be a source o conflic as invesors romdifferen backgrounds paricipae in inernaional invesmen aciviies (Critenden ampCritenden 2010 El-Ansary 2005 McCleary amp Barro 2006) o his end and wih heaoremenioned debae in mind his paper examines he perormance o boh Sharia-complian and convenional capial markes during he Islamic holy monh o RamadanTe sudy includes daa rom boh he emerging markes where Islam is prominen

as well as rom non-Muslim counries wih Islamic sock lisings While our analysessuppor prior findings ha here is indeed a ldquoRamadan Effecrdquo (eg Bialkowski Eebari



107


2 Lieraure eview









108









109











110










111





112









(1)sum=

= jT

T t

it

est

N

i

N

it RT

R= R ndash 1

0

1

where N






113


(2)M

t ii

N

it R= R

andand

+ β α

where M


and

α and i

and




sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)


sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)





114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




107


2 Lieraure eview









108









109











110










111





112









(1)sum=

= jT

T t

it

est

N

i

N

it RT

R= R ndash 1

0

1

where N






113


(2)M

t ii

N

it R= R

andand

+ β α

where M


and

α and i

and




sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)


sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)





114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




108









109











110










111





112









(1)sum=

= jT

T t

it

est

N

i

N

it RT

R= R ndash 1

0

1

where N






113


(2)M

t ii

N

it R= R

andand

+ β α

where M


and

α and i

and




sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)


sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)





114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




109











110










111





112









(1)sum=

= jT

T t

it

est

N

i

N

it RT

R= R ndash 1

0

1

where N






113


(2)M

t ii

N

it R= R

andand

+ β α

where M


and

α and i

and




sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)


sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)





114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




110










111





112









(1)sum=

= jT

T t

it

est

N

i

N

it RT

R= R ndash 1

0

1

where N






113


(2)M

t ii

N

it R= R

andand

+ β α

where M


and

α and i

and




sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)


sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)





114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




111





112









(1)sum=

= jT

T t

it

est

N

i

N

it RT

R= R ndash 1

0

1

where N






113


(2)M

t ii

N

it R= R

andand

+ β α

where M


and

α and i

and




sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)


sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)





114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




112









(1)sum=

= jT

T t

it

est

N

i

N

it RT

R= R ndash 1

0

1

where N






113


(2)M

t ii

N

it R= R

andand

+ β α

where M


and

α and i

and




sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)


sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)





114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




113


(2)M

t ii

N

it R= R

andand

+ β α

where M


and

α and i

and




sum=

= jT

t

it

est

i

N

it it it

ART

ARVAR

R R= AR

ndash 1

0

2

)2 ndash (

1)(

ndash

(3)


sum

sum

=

=

= I

i

i

I

i

it t

ARVAR I

AARVAR

AR I

= AAR

12

1

)(1

)(

1

(4)





114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




114





θtRank = sum

=

+1

)()2

1 ndash (1 I

i

it K sT K

I (5)

sum sum= =

+=

2

1 1

2))2

1 ndash (

1(

1)(

T

T t

I

i

it

T K

I T K s




θtSign =

sum =

5050 ndash

1

I

i it I

I

S

(6)

lt

=otherwisezero

0if 1it

it

ARS




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




115



r qq

qr s Z t

) ndash 1(

ndash = (7)









116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




116











117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




117






118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




118






Pan Arab Region






119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




119


he rhyhms o Ramadan




120











121









122





eferences
















123





















124




120











121









122





eferences
















123





















124




121









122





eferences
















123





















124




122





eferences
















123





















124




123





















124




124


mitchell et al - 2014 - omee - conventional vs islamic finance

Documents