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Ramadan effect and indices movement estimation: a case study from eight Arab countries

Ramadan effect and indices movement estimation: a case study from eight Arab countries This study aims to investigate the Ramadan effect anomaly on the stock markets’ indices and estimate the movement of these indices in the light of the phenomenon.Design/methodology/approachStock market indices are used as financial indicators to show the Ramadan effect. To validate this effect, eight Arab countries, which comprises Jordan, Saudi Arabia, Oman, Qatar, United Arab Emirates, Bahrain, Kuwait and Egypt, are adopted. A linear regression with R2, error, F-value and p-value is considered to analyze and understand the effect of Ramadan on the aforementioned Arab countries.FindingsResults found that Ramadan has a strong effect on estimating and predicting the performance of stock market indices in all studied Arab countries, except Kuwait. Results found that the majority of the Ramadan effect occurred after the second 10 days of Ramadan, where the direction of stock indices is opposite of Ramadan variables in all aforementioned cases.Originality/valueThis study is considered as an enrichment of the existing literature review with regard to the Ramadan effect. The study presents a new methodology that can be followed to improve the predictions of stock market indices by using a weight least square method with linear regression. This study presents the most affected periods of time that could decrease or increase the stock prices. Finally, the study proves the capability of the weight least square method in building a predictive model that takes the date into consideration in predicting stock market indices. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Islamic Marketing Emerald Publishing

Ramadan effect and indices movement estimation: a case study from eight Arab countries

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References (64)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1759-0833
eISSN
1759-0833
DOI
10.1108/jima-01-2022-0008
Publisher site
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Abstract

This study aims to investigate the Ramadan effect anomaly on the stock markets’ indices and estimate the movement of these indices in the light of the phenomenon.Design/methodology/approachStock market indices are used as financial indicators to show the Ramadan effect. To validate this effect, eight Arab countries, which comprises Jordan, Saudi Arabia, Oman, Qatar, United Arab Emirates, Bahrain, Kuwait and Egypt, are adopted. A linear regression with R2, error, F-value and p-value is considered to analyze and understand the effect of Ramadan on the aforementioned Arab countries.FindingsResults found that Ramadan has a strong effect on estimating and predicting the performance of stock market indices in all studied Arab countries, except Kuwait. Results found that the majority of the Ramadan effect occurred after the second 10 days of Ramadan, where the direction of stock indices is opposite of Ramadan variables in all aforementioned cases.Originality/valueThis study is considered as an enrichment of the existing literature review with regard to the Ramadan effect. The study presents a new methodology that can be followed to improve the predictions of stock market indices by using a weight least square method with linear regression. This study presents the most affected periods of time that could decrease or increase the stock prices. Finally, the study proves the capability of the weight least square method in building a predictive model that takes the date into consideration in predicting stock market indices.

Journal

Journal of Islamic Marketing – Emerald Publishing

Published: Jul 14, 2023

Keywords: Ramadan effect; Stock market prediction; Arab countries; Weight least square

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