The Effect of Religiosity on Stock Market Speculation

This study investigates whether religiosity affects stock market speculation. We use data from the Gulf Cooperation Council (GCC) countries characterized by a high level of religiosity and clearly defined religious rules on investing. We find that during Ramadan, the stock markets of these countries encounter relatively lower levels of market volatility, idiosyncratic volatility, and trading frequency. We do not find significant changes in absolute returns during Ramadan compared with other months. However, a drop in volatility leads to higher risk-adjusted returns. Our results indicate that religiosity is negatively related to stock market speculation.