Seasonality in stock returns and volatility: The Ramadan effect

Fazal J. Seyyed; Abraham Abraham; Mohsen Al-Hajji

doi:10.1016/j.ribaf.2004.12.010

Seasonality in stock returns and volatility: The Ramadan effect

Fazal J. Seyyed, Abraham Abraham^*, Mohsen Al-Hajji

^*Corresponding author for this work

King Fahd University of Petroleum & Minerals

Research output: Contribution to journal › Article › peer-review

93 Scopus citations

Abstract

Calendar anomalies in stock returns are well documented. Less obvious is the existence of seasonality in return volatility associated with moving calendar events such as the Muslim holy month of Ramadan. Using a GARCH specification and data for the Saudi Arabian stock market - now the largest stock market in the Muslim world - this paper documents a systematic pattern of decline in volatility during Ramadan, implying a predictable variation in the market price of risk. An examination of trading data shows that this anomaly appears to be consistent with a decline in trading activity during Ramadan. Evidence of systematic decline in volatility during Ramadan has significant implications for pricing of securities especially option-like products and asset allocation decisions by investors in the Islamic countries.

Original language	English
Pages (from-to)	374-383
Number of pages	10
Journal	Research in International Business and Finance
Volume	19
Issue number	3
DOIs	https://doi.org/10.1016/j.ribaf.2004.12.010
State	Published - Sep 2005

Keywords

Calendar anomaly
Moving calendar event
Ramadan effect

ASJC Scopus subject areas

Business, Management and Accounting (miscellaneous)
Finance

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10.1016/j.ribaf.2004.12.010

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title = "Seasonality in stock returns and volatility: The Ramadan effect",

abstract = "Calendar anomalies in stock returns are well documented. Less obvious is the existence of seasonality in return volatility associated with moving calendar events such as the Muslim holy month of Ramadan. Using a GARCH specification and data for the Saudi Arabian stock market - now the largest stock market in the Muslim world - this paper documents a systematic pattern of decline in volatility during Ramadan, implying a predictable variation in the market price of risk. An examination of trading data shows that this anomaly appears to be consistent with a decline in trading activity during Ramadan. Evidence of systematic decline in volatility during Ramadan has significant implications for pricing of securities especially option-like products and asset allocation decisions by investors in the Islamic countries.",

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T2 - The Ramadan effect

AU - Seyyed, Fazal J.

AU - Abraham, Abraham

AU - Al-Hajji, Mohsen

PY - 2005/9

Y1 - 2005/9

N2 - Calendar anomalies in stock returns are well documented. Less obvious is the existence of seasonality in return volatility associated with moving calendar events such as the Muslim holy month of Ramadan. Using a GARCH specification and data for the Saudi Arabian stock market - now the largest stock market in the Muslim world - this paper documents a systematic pattern of decline in volatility during Ramadan, implying a predictable variation in the market price of risk. An examination of trading data shows that this anomaly appears to be consistent with a decline in trading activity during Ramadan. Evidence of systematic decline in volatility during Ramadan has significant implications for pricing of securities especially option-like products and asset allocation decisions by investors in the Islamic countries.

AB - Calendar anomalies in stock returns are well documented. Less obvious is the existence of seasonality in return volatility associated with moving calendar events such as the Muslim holy month of Ramadan. Using a GARCH specification and data for the Saudi Arabian stock market - now the largest stock market in the Muslim world - this paper documents a systematic pattern of decline in volatility during Ramadan, implying a predictable variation in the market price of risk. An examination of trading data shows that this anomaly appears to be consistent with a decline in trading activity during Ramadan. Evidence of systematic decline in volatility during Ramadan has significant implications for pricing of securities especially option-like products and asset allocation decisions by investors in the Islamic countries.

KW - Calendar anomaly

KW - Moving calendar event

KW - Ramadan effect

UR - https://www.scopus.com/pages/publications/23444451867

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DO - 10.1016/j.ribaf.2004.12.010

M3 - Article

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SN - 0275-5319

VL - 19

SP - 374

EP - 383

JO - Research in International Business and Finance

JF - Research in International Business and Finance

IS - 3

ER -

Seasonality in stock returns and volatility: The Ramadan effect

Abstract

Keywords

ASJC Scopus subject areas

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