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Risk, return, and liquidity during Ramadan: Evidence from Indonesian and Malaysian stock markets

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  • Lai, Ya-Wen
  • Windawati, Atif

Abstract

Indonesia and Malaysia are common in religion; however, the two countries have different developments in their equity markets. This study investigates the risk, return, and liquidity during Ramadan for the Indonesia and Malaysia stock markets. We find that the volatility is higher around Ramadan for the Indonesia stock market, while displays dynamic patterns in different phases around the month of Ramadan for Malaysia. Despite the changing risk during Ramadan, the risk-adjusted return remains unchanged. Furthermore, this study finds that the liquidity in most stock index markets of the two countries is higher around Ramadan. These findings support the notion that Ramadan affects investors’ risk-taking attitude and facilitates the trade in stocks.

Suggested Citation

  • Lai, Ya-Wen & Windawati, Atif, 2017. "Risk, return, and liquidity during Ramadan: Evidence from Indonesian and Malaysian stock markets," Research in International Business and Finance, Elsevier, vol. 42(C), pages 233-241.
    • Handle: RePEc:eee:riibaf:v:42:y:2017:i:c:p:233-241
    DOI: 10.1016/j.ribaf.2017.04.054
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    1. Białkowski, Jędrzej & Yaghoubi, Mona, 2021. "The Ramadan effect: A standalone anomaly or just a compensation for low liquidity?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    2. Sharma, Susan Sunila & Thuraisamy, Kannan & Madyan, Muhammad & Laila, Nisful, 2019. "Evidence of price discovery on the Indonesian stock exchange," Economic Modelling, Elsevier, vol. 83(C), pages 2-7.
    3. Andrikopoulos, Panagiotis & Cui, Yueting & Gad, Samar & Kallinterakis, Vasileios, 2020. "Feedback trading and the ramadan effect in frontier markets," Research in International Business and Finance, Elsevier, vol. 51(C).
    4. Tastaftiyan Risfandy & Wahyu Trinarningsih & Harmadi Harmadi & Irwan Trinugroho, 2019. "Islamic Banks’ Market Power, State-Owned Banks, And Ramadan: Evidence From Indonesia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(02), pages 423-440, March.

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    More about this item

    Keywords

    Ramadan effect; Volatility; Liquidity; Indonesia stock market; Malaysia stock market;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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