Ramadan effect on sectoral herding

Abstract

One variable that affects stocks prices in the financial markets is herding behavior. As the level of herding is not constant over time, its level may be different during some events. Herding may increase during religious events like Ramadan in the Muslim world causing volatility to increase and leading to unexplained stock prices. The purpose of this study was to test the effect of Ramadan on herding presence at market and sector levels. The study was based on the behavioral finance theory which considers mood and behavior of investors as variables that may affect the prices of stocks. The enquiry that the researcher tried to answer was whether the presence of herding in the market and sectors is affected by Ramadan. To achieve the study purpose, a quantitative study was conducted using daily data from Amman stock exchange for the period from 2000 to 2018. Collected data were analyzed using ordinary least squares (OLS) method. The Results of market-level analysis showed that market investors do not herd during and out of Ramadan. At sector-level, however, herding is absent during Ramadan and exists out of it in services and industrial sectors while it's absent in both times in the financial sector.

Ramazan Ayi Ve Sürü Davranişi: Borsa İstanbul Üzeri̇ne Bi̇r Araştirma

“…This result does not change for rising and falling market conditions and different days of Ramadan (first, second, last ten days, and odd and even numbered days in the last ten days). On the other hand, this result is the same as the results of studies in the literature (Gabbori at al., 2022;Elshqirat, 2020;Yousaf at al., 2018), which empirically prove that Ramadan does not cause herding behavior. Another result obtained in the study is that herding behavior is observed in Borsa Istanbul, except for Ramadan days and in rising market conditions.…”

“…Bu sonuç, yükselen ve düşen piyasa koşulları ile Ramazan ayının farklı günleri (ilk, ikinci, son on gün ile son on günündeki tek ve çift sayılı günler) için de değişmemektedir. Diğer taraftan bu sonuç, literatürde Ramazan ayının sürü davranışına neden olmadığını ampirik olarak kanıtlayan çalışmaların(Gabbori vd., 2022;Elshqirat, 2020; Yousaf vd., 2018) sonuçlarıyla aynıdır. Çalışmada elde edilen bir diğer sonuç da Borsa İstanbul'da Ramazan ayı günleri dışında ve yükselen piyasa koşullarında sürü davranışının görülmesidir.…”

How COVID-19 Affected Herding Behavior in the Jordanian Stock Market

“…In addition, herding behavior may increase volatility in the market and eventually make the market inefficient (Elshqirat, 2019). This behavior is changing over time and was concluded to be different during some periods like religious occasions (Elshqirat, 2020), times of market rising and falling (Elshqirat, 2019), and times of global financial crisis (BenSaïda, Jlassi, & Litimi, 2015). Based on this, the behavior may be changed during the time of pandemics like COVID-19.…”