Date of Award
Economics and Finance
M. Kabir Hassan
tarun K Mukherjee
Walter J Lane
The dissertation consists of two essays. In the first essay we compare the performance of Islamic and conventional stock returns in Saudi Arabia in order to determine whether the Saudi market exhibits characteristics that are consistent with segmented markets and investor recognition effects. We sample the daily stock returns of all Saudi firms from September 2002 to 2015 and calculate important measures, including idiosyncratic volatility (Ang et al, 2006), market integration (Pukthuanthong and Roll, 2009), systematic turnover (Loughran and Schultz, 2005), and stock turnover and liquidity (Amihud, 2002). Integration tests report that Islamic stocks are more sensitive to changes in global and local macroeconomic variables than conventional stocks, supporting the hypothesis that the Islamic and conventional stock markets are segmented in Saudi Arabia. In addition, our results show that Islamic stocks have larger number of investors, lower idiosyncratic risk, higher systematic turnover, and more liquid than conventional stocks, which supports the investor recognition hypothesis. Our results provide new evidence on asset pricing in emerging markets, the evolving Islamic financial markets, and the potential impact of other implicit market barriers on global financial markets. In the second essay we examine the effects of shared beliefs and personal preferences of individual investors on their trading and investment decisions. We anticipate that the process of classifying stocks into Shariah compliant (Islamic) and non-shariah compliant (conventional) has an effect on investibility and acceptance of the stock especially by unsophisticated or individual investors. The wide acceptance of Islamic stocks between individual investors promote and facilitate the circulation of firm-specific information between certain groups of investors. Our results indicate that stock classification has an effect on the stock price comovement through increased stock trading correlation between the groups of Islamic investors. The commonality in preferences between Islamic stocks’ holders generate commonality in trading activity and in stock liquidity. We find that classifying a stock as an Islamic stock increases its price comovement with other Islamic stocks and also increases its commonality in liquidity.
Alhomaidi, Asem, "Social norms and stock trading" (2017). University of New Orleans Theses and Dissertations. 2373.
Available for download on Thursday, August 09, 2018