INFORMATION ASYMMETRY AND RELIGIOUS SEASONALITY
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2025-11-27
Keywords:
PIN, Ramadan effect, Institutional investor
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Abstract
This paper examines the seasonality in information asymmetry as proxied by the probability of informed trading (PIN) in relation to the Islamic holy month of Ramadan. It utilizes data collected from Boursa Kuwait, covering the period from January 2013 to December 2018, and pooled panel regressions to test the hypothesis that increasing religiosity during Ramadan would reduce the probability of informed trading. The results reveal that the PIN increases during Ramadan relative to other Islamic calendar months, contrary to our hypothesis. Further tests reveal that institutional trading activities increase during Ramadan compared to individual trading. We argue that the presence of sophisticated traders (institutional traders) in the market during Ramadan contributes to the observed increase in the PIN effect. This study contributes to the literature by exploring the relationship between religiosity and information asymmetry in the context of an Islamic financial market, offering new insights into the behaviour of institutional traders during the holy month of Ramadan. We refer this phenomenon as the “Ramadan PIN effect”, which differs from the previously documented "Ramadan returns effect" and "Ramadan liquidity effect".
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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Journal of Islamic Monetary Economics and Finance is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
How to Cite
Al-Awadhi, A. M., Bash, A., Algharabali, B., & Khatatbeh, I. (2025). INFORMATION ASYMMETRY AND RELIGIOUS SEASONALITY. Journal of Islamic Monetary Economics and Finance, 11(4). https://doi.org/10.21098/jimf.v11i4.2495
References
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Al-Awadhi, A. M., Alhashel, B. S., & Bash, A. (2021). Social norms and information asymmetry: the effect of religion on informed trading. Journal of Sustainable Finance & Investment, 1-12.
Al-Awadhi, A. (2019). The effect of religiosity on stock market speculation. Emerging Markets Finance and Trade, 1-20.
Al-Awadhi, A., & Dempsey, M. (2017). Social norms and market outcomes: The effects of religious beliefs on stock markets. Journal of International Financial Markets, 50, 119-134.
Al-Khazali, O. (2014). Revisiting fast profit investor sentiment and stock returns during Ramadan. International Review of Financial Analysis, 33:158–170.
Almudhaf, F. (2012). The Islamic calendar effect: Evidence from twelve stock markets. International Research Journal of Finance and Economics, 87:185–191.
Al-Najjar, D., Assous, H. F., Al-Najjar, H., & Al-Rousan, N. (2023). Ramadan effect and indices movement estimation: A case study from eight Arab countries. Journal of Islamic Marketing, 14(8), 1989-2008.
Alhomaidi, A., Hassan, M., Hippler, W., & Mamun, A. (2019). The impact of religious certification on market segmentation and investor recognition. Journal of Corporate Finance, 55, 28-48
Al-Hajieh, H., Redhead, K., & Rodgers, T. (2011). Investor sentiment and calendar anomaly effects: a case study of the impact of Ramadan on Islamic Middle Eastern markets, Research in International Business and Finance, Vol. 25 No. 3, pp. 345-356. https://doi.org/10.1016/j.ribaf.2011.03.004
Ali, I., Akhter, W., & Chaudhry, N. (2023). Do Islamic Holy days affect stock returns? Empirical evidence from Asian and African markets. Journal of Islamic Marketing, 14(1), 273-288.
Al-Masri, R.Y. (2007). Speculation between proponents and opponents, Islamic Economics, Vol. 20 No. 1, pp. 43-52. https://doi.org/10.4197/islec.20-1.3.
Arellano, M. (2003). Panel data econometrics. Oxford University Press.
Baltagi, B. (2008). Econometric Analysis of Panel Data. John Wiley & Sons.
Białkowski, J., Etebari, A., & Wisniewski, T.P. (2012). Fast profits: investor sentiment and stock returns during Ramadan, Journal of Banking & Finance, Vol. 36 No. 3, pp. 835-845. https://doi.org/10.1016/j.jbankfin.2011.09.014
Campante, F., & Yanagizawa-Drott, D. (2015). Does religion affect economic growth and happiness? Evidence from Ramadan, The Quarterly Journal of Economics, Vol. 130 No. 2, pp. 615-658. doi:10.1093/qje/qjv002
Chaouachi, O. (2021). Impact of the religious festivity on the tunis stock exchange. Investment Management and Financial Innovations, 18(2), 12-19.
Cont, R. (2006). Model uncertainty and its impact on the pricing of derivative instruments. Mathematical finance, 16(3), 519-547.
Daradkeh, T.K. (1992). Parasuicide during Ramadan in Jordan. Acta Psychiatrica Scandinavica 86 (3), 253–254.
Du, X. (2013). Does religion matter to owner-manager agency costs? Evidence from China. Journal of Business Ethics, 118, 319-347.
Dorn, D., and P. Sengmueller. 2009. Trading as entertainment? Management Science 55 (4):591–603. doi:10.1287/ mnsc.1080.0962.
Easley, D., & O'hara, M. (1992). Time and the process of security price adjustment. The Journal of Finance, 47(2), 577-605.
Easley, D., Kiefer, N., O'hara, M., & Paperman, J. (1996). Liquidity, information, and infrequently traded stocks. The Journal of Finance, 51(4), 1405-1436.
Evans, T., Cullen, F., Dunaway, R., & Burton Jr, V. (1995). Religion and Crime reexamined: The impact of religion, secular controls and social ecology on adult criminality. Criminology, 33(2), 195-224.
Fabozzi, F., Ma, K., & Oliphant, B. (2008). Sin stock returns. The Journal of Portfolio Management, 35(1), 82-94.
Friedman, M., & Savage, L.J. (1948). The utility analysis of choices involving risk. The Journal of Political Economy, Vol. 56 No. 4, pp. 279-304.
Frieder, L. and Subrahmanyam, A. (2004). Nonsecular regularities in returns and volume. Financial Analysts Journal, 60(4):29–34.
Gan, Q., Wei, W., & Johnstone, D. (2015). A faster estimation method for the probability of informed trading using hierarchical agglomerative clustering. Quantitative Finance, 15(11), 1805-1821.
Griffin, J. M., Shu, T., & Topaloglu, S. (2012). Examining the dark side of financial markets: Do institutions trade on information from investment bank connections?. The Review of Financial Studies, 25(7), 2155-2188.
Goodell, J. W., Kumar, S., Rao, P., & Verma, S. (2023). Emotions and stock market anomalies: a systematic review. Journal of Behavioral and Experimental Finance, 37, 100722.
Hsiao, C. (2014). Analysis of Panel Data. Cambridge University Press.
Hassan, M. H., & Kayser, M. S. (2019). Ramadan effect on stock market return and trade volume: Evidence from Dhaka Stock Exchange (DSE). Cogent Economics & Finance, 7(1), 16051
Hendershott, T., Livdan, D., & Schürhoff, N. (2015). Are institutions informed about news?. Journal of financial economics, 117(2), 249-287.
Hilary, G., & Hui, K. (2009). Does religion matter in corporate decision making in America? Journal of Financial Economics, 93(3), 455-473.
Husain, F. (1998). A seasonality in the Pakistani equity market: The Ramadhan effect. Pakistan Development Review, 37(1):77–81.
Jurkatis, S. (2022). Inferring trade directions in fast markets. Journal of Financial Markets, 58, 100635.
Kang, M. (2010). Probability of information-based trading and the January effect. Journal of Banking & Finance, 34(12), 2985-2994.
Kamali, M.H. (1996). Islamic commercial law: an analysis of futures, American Journal of Islamic Social Sciences, Vol. 13 No. 2, pp. 197-224. https://doi.org/10.35632/ajis.v13i2.2330
Knerr, I., Pearl, P.L., (2008) Ketogenic diet: stoking energy stores and still posing questions. Experimental Neurology 11, 11–13.
Kumar, A., & Page, J.K. (2014). Deviations from norms and informed trading. Journal of Financial and Quantitative Analysis, Vol. 49 No. 4, pp. 1005-1037. https://doi.org/10.1017/S0022109014000519
Kumar, A. (2009). Who gambles in the stock market? The Journal of Finance, 64(4), 1889-1933.
Kumar, A., Page, J., & Spalt, O. (2011). Religious beliefs, gambling attitudes, and financial market outcomes. Journal of Financial Economics, 102(3), 671-708.
Lau, J. S., Ghafar, R., Zulkifli, E. Z., & Hashim, H. A. (2023). The Effects of Ramadan Fasting on Mood and Performance of Male Adolescent Archers. Annals of Applied Sport Science, 11(1), 0-0.
Lopez-Martin, C. (2022). Ramadan effect in the cryptocurrency markets. Review of Behavioral Finance, 14(4), 508-532.
Lyons, T. J. (1995). Uncertain volatility and the risk-free synthesis of derivatives. Applied mathematical finance, 2(2), 117-133.
Lee, C., & Ready, M. (1991). Inferring trade direction from intraday data. The Journal of Finance, 46(2), 733-746.
Markowitz, H. (1952). Portfolio selection, The Journal of Finance, Vol. 7 No. 1, pp. 77-91.
Mustafa, K. (2008). The Islamic calendar effect on Karachi stock market. Global Business Review, 13(3), 562-574.
Mehran, J., Meisami, A., & Busenbark, J. R. (2012). L'Chaim: Jewish holidays and stock market returns. Managerial Finance, 38(7), 641-652.
Naughton, S., & Naughton, T. (2000). Religion, ethics and stock trading: the case of an Islamic equities market, Journal of Business Ethics, Vol. 23 No. 2, pp. 145-159. https://doi.org/10.1023/A:1006161616855
Pantzalis, C., & Ucar, E. (2014). Religious holidays, investor distraction, and earnings announcement effects. Journal of Banking & Finance, 47, 102-117.
Pan, L., Y. Tang, and J. Xu. 2015. Speculative trading and stock returns. Review of Finance 20 (5):1–31.
Qureshi, T. (1982). Justice in Islam. Islamic Studies, 21(2), 35-51.
Seyyed, F. J., Abraham, A., and Al-Hajji, M. (2005). Seasonality in stock returns and volatility: The Ramadan effect. Research in International Business and Finance, 19(3):374–383.
Scheinkman, J. A., and W. Xiong. 2003. Overconfidence and speculative bubbles. Journal of Political Economy, 111 (6):1183–220. doi:10.1086/378531.
Taj El Din, S.-d. (1996). The stock-exchange from an Islamic perspective. Journal of King Abdulaziz University: Islamic Economics,8, 29-46.
Tokic, D. 2014. Legitimate speculation versus excessive speculation. Journal of Asset Management, 15 (6):378–91. doi:10.1057/jam.2014.33.
Tudor, C. (2021). Investors’ trading activity and information asymmetry: Evidence from the Romanian stock market. Risks, 9(8), 149.
Wasiuzzaman, S., & Al-Musehel, N. A. (2018). Mood, religious experience and the Ramadan effect. International Journal of Emerging Markets, 13(1), 290-307.
Yan, Y., & Zhang, S. (2012). An improved estimation method and empirical properties of the probability of informed trading. Journal of Banking & Finance, 36(2), 454-467.
Yousaf, I., Ali, S., & Shah, S. Z. A. (2018). Herding behavior in Ramadan and financial crises: the case of the Pakistani stock market. Financial Innovation, 4(1), 1-14.
Zaher, T., & Kabir Hassan, M. (2001). A comparative literature survey of Islamic finance and banking. Financial Markets, Institutions & Instruments, 10(4), 155-199.
Al-Awadhi, A. M., Alhashel, B. S., & Bash, A. (2021). Social norms and information asymmetry: the effect of religion on informed trading. Journal of Sustainable Finance & Investment, 1-12.
Al-Awadhi, A. (2019). The effect of religiosity on stock market speculation. Emerging Markets Finance and Trade, 1-20.
Al-Awadhi, A., & Dempsey, M. (2017). Social norms and market outcomes: The effects of religious beliefs on stock markets. Journal of International Financial Markets, 50, 119-134.
Al-Khazali, O. (2014). Revisiting fast profit investor sentiment and stock returns during Ramadan. International Review of Financial Analysis, 33:158–170.
Almudhaf, F. (2012). The Islamic calendar effect: Evidence from twelve stock markets. International Research Journal of Finance and Economics, 87:185–191.
Al-Najjar, D., Assous, H. F., Al-Najjar, H., & Al-Rousan, N. (2023). Ramadan effect and indices movement estimation: A case study from eight Arab countries. Journal of Islamic Marketing, 14(8), 1989-2008.
Alhomaidi, A., Hassan, M., Hippler, W., & Mamun, A. (2019). The impact of religious certification on market segmentation and investor recognition. Journal of Corporate Finance, 55, 28-48
Al-Hajieh, H., Redhead, K., & Rodgers, T. (2011). Investor sentiment and calendar anomaly effects: a case study of the impact of Ramadan on Islamic Middle Eastern markets, Research in International Business and Finance, Vol. 25 No. 3, pp. 345-356. https://doi.org/10.1016/j.ribaf.2011.03.004
Ali, I., Akhter, W., & Chaudhry, N. (2023). Do Islamic Holy days affect stock returns? Empirical evidence from Asian and African markets. Journal of Islamic Marketing, 14(1), 273-288.
Al-Masri, R.Y. (2007). Speculation between proponents and opponents, Islamic Economics, Vol. 20 No. 1, pp. 43-52. https://doi.org/10.4197/islec.20-1.3.
Arellano, M. (2003). Panel data econometrics. Oxford University Press.
Baltagi, B. (2008). Econometric Analysis of Panel Data. John Wiley & Sons.
Białkowski, J., Etebari, A., & Wisniewski, T.P. (2012). Fast profits: investor sentiment and stock returns during Ramadan, Journal of Banking & Finance, Vol. 36 No. 3, pp. 835-845. https://doi.org/10.1016/j.jbankfin.2011.09.014
Campante, F., & Yanagizawa-Drott, D. (2015). Does religion affect economic growth and happiness? Evidence from Ramadan, The Quarterly Journal of Economics, Vol. 130 No. 2, pp. 615-658. doi:10.1093/qje/qjv002
Chaouachi, O. (2021). Impact of the religious festivity on the tunis stock exchange. Investment Management and Financial Innovations, 18(2), 12-19.
Cont, R. (2006). Model uncertainty and its impact on the pricing of derivative instruments. Mathematical finance, 16(3), 519-547.
Daradkeh, T.K. (1992). Parasuicide during Ramadan in Jordan. Acta Psychiatrica Scandinavica 86 (3), 253–254.
Du, X. (2013). Does religion matter to owner-manager agency costs? Evidence from China. Journal of Business Ethics, 118, 319-347.
Dorn, D., and P. Sengmueller. 2009. Trading as entertainment? Management Science 55 (4):591–603. doi:10.1287/ mnsc.1080.0962.
Easley, D., & O'hara, M. (1992). Time and the process of security price adjustment. The Journal of Finance, 47(2), 577-605.
Easley, D., Kiefer, N., O'hara, M., & Paperman, J. (1996). Liquidity, information, and infrequently traded stocks. The Journal of Finance, 51(4), 1405-1436.
Evans, T., Cullen, F., Dunaway, R., & Burton Jr, V. (1995). Religion and Crime reexamined: The impact of religion, secular controls and social ecology on adult criminality. Criminology, 33(2), 195-224.
Fabozzi, F., Ma, K., & Oliphant, B. (2008). Sin stock returns. The Journal of Portfolio Management, 35(1), 82-94.
Friedman, M., & Savage, L.J. (1948). The utility analysis of choices involving risk. The Journal of Political Economy, Vol. 56 No. 4, pp. 279-304.
Frieder, L. and Subrahmanyam, A. (2004). Nonsecular regularities in returns and volume. Financial Analysts Journal, 60(4):29–34.
Gan, Q., Wei, W., & Johnstone, D. (2015). A faster estimation method for the probability of informed trading using hierarchical agglomerative clustering. Quantitative Finance, 15(11), 1805-1821.
Griffin, J. M., Shu, T., & Topaloglu, S. (2012). Examining the dark side of financial markets: Do institutions trade on information from investment bank connections?. The Review of Financial Studies, 25(7), 2155-2188.
Goodell, J. W., Kumar, S., Rao, P., & Verma, S. (2023). Emotions and stock market anomalies: a systematic review. Journal of Behavioral and Experimental Finance, 37, 100722.
Hsiao, C. (2014). Analysis of Panel Data. Cambridge University Press.
Hassan, M. H., & Kayser, M. S. (2019). Ramadan effect on stock market return and trade volume: Evidence from Dhaka Stock Exchange (DSE). Cogent Economics & Finance, 7(1), 16051
Hendershott, T., Livdan, D., & Schürhoff, N. (2015). Are institutions informed about news?. Journal of financial economics, 117(2), 249-287.
Hilary, G., & Hui, K. (2009). Does religion matter in corporate decision making in America? Journal of Financial Economics, 93(3), 455-473.
Husain, F. (1998). A seasonality in the Pakistani equity market: The Ramadhan effect. Pakistan Development Review, 37(1):77–81.
Jurkatis, S. (2022). Inferring trade directions in fast markets. Journal of Financial Markets, 58, 100635.
Kang, M. (2010). Probability of information-based trading and the January effect. Journal of Banking & Finance, 34(12), 2985-2994.
Kamali, M.H. (1996). Islamic commercial law: an analysis of futures, American Journal of Islamic Social Sciences, Vol. 13 No. 2, pp. 197-224. https://doi.org/10.35632/ajis.v13i2.2330
Knerr, I., Pearl, P.L., (2008) Ketogenic diet: stoking energy stores and still posing questions. Experimental Neurology 11, 11–13.
Kumar, A., & Page, J.K. (2014). Deviations from norms and informed trading. Journal of Financial and Quantitative Analysis, Vol. 49 No. 4, pp. 1005-1037. https://doi.org/10.1017/S0022109014000519
Kumar, A. (2009). Who gambles in the stock market? The Journal of Finance, 64(4), 1889-1933.
Kumar, A., Page, J., & Spalt, O. (2011). Religious beliefs, gambling attitudes, and financial market outcomes. Journal of Financial Economics, 102(3), 671-708.
Lau, J. S., Ghafar, R., Zulkifli, E. Z., & Hashim, H. A. (2023). The Effects of Ramadan Fasting on Mood and Performance of Male Adolescent Archers. Annals of Applied Sport Science, 11(1), 0-0.
Lopez-Martin, C. (2022). Ramadan effect in the cryptocurrency markets. Review of Behavioral Finance, 14(4), 508-532.
Lyons, T. J. (1995). Uncertain volatility and the risk-free synthesis of derivatives. Applied mathematical finance, 2(2), 117-133.
Lee, C., & Ready, M. (1991). Inferring trade direction from intraday data. The Journal of Finance, 46(2), 733-746.
Markowitz, H. (1952). Portfolio selection, The Journal of Finance, Vol. 7 No. 1, pp. 77-91.
Mustafa, K. (2008). The Islamic calendar effect on Karachi stock market. Global Business Review, 13(3), 562-574.
Mehran, J., Meisami, A., & Busenbark, J. R. (2012). L'Chaim: Jewish holidays and stock market returns. Managerial Finance, 38(7), 641-652.
Naughton, S., & Naughton, T. (2000). Religion, ethics and stock trading: the case of an Islamic equities market, Journal of Business Ethics, Vol. 23 No. 2, pp. 145-159. https://doi.org/10.1023/A:1006161616855
Pantzalis, C., & Ucar, E. (2014). Religious holidays, investor distraction, and earnings announcement effects. Journal of Banking & Finance, 47, 102-117.
Pan, L., Y. Tang, and J. Xu. 2015. Speculative trading and stock returns. Review of Finance 20 (5):1–31.
Qureshi, T. (1982). Justice in Islam. Islamic Studies, 21(2), 35-51.
Seyyed, F. J., Abraham, A., and Al-Hajji, M. (2005). Seasonality in stock returns and volatility: The Ramadan effect. Research in International Business and Finance, 19(3):374–383.
Scheinkman, J. A., and W. Xiong. 2003. Overconfidence and speculative bubbles. Journal of Political Economy, 111 (6):1183–220. doi:10.1086/378531.
Taj El Din, S.-d. (1996). The stock-exchange from an Islamic perspective. Journal of King Abdulaziz University: Islamic Economics,8, 29-46.
Tokic, D. 2014. Legitimate speculation versus excessive speculation. Journal of Asset Management, 15 (6):378–91. doi:10.1057/jam.2014.33.
Tudor, C. (2021). Investors’ trading activity and information asymmetry: Evidence from the Romanian stock market. Risks, 9(8), 149.
Wasiuzzaman, S., & Al-Musehel, N. A. (2018). Mood, religious experience and the Ramadan effect. International Journal of Emerging Markets, 13(1), 290-307.
Yan, Y., & Zhang, S. (2012). An improved estimation method and empirical properties of the probability of informed trading. Journal of Banking & Finance, 36(2), 454-467.
Yousaf, I., Ali, S., & Shah, S. Z. A. (2018). Herding behavior in Ramadan and financial crises: the case of the Pakistani stock market. Financial Innovation, 4(1), 1-14.
Zaher, T., & Kabir Hassan, M. (2001). A comparative literature survey of Islamic finance and banking. Financial Markets, Institutions & Instruments, 10(4), 155-199.