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Is there a financial news risk premium in Islamic stocks?

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  • Narayan, Paresh Kumar
  • Phan, Dinh Hoang Bach
  • Narayan, Seema
  • Bannigidadmath, Deepa

Abstract

This paper examines whether there is a financial news risk premium in Islamic stocks. We utilize a unique data set that includes over 2000 stocks listed on multiple markets. Our main findings are twofold. First, simple trading strategies that buy high news sensitive portfolios and sell low news sensitive portfolios generate annualized returns of 4.92% to 12.48%. Second, we perform a momentum trading strategy for high and low news sensitive stocks and find that while both portfolios are profitable, investing in a portfolio of high news sensitive stocks generates an additional profit of 5.60% per annum. Our results are robust to different composition of portfolios, different momentum portfolio rules, and market risk-adjusted excess returns.

Suggested Citation

  • Narayan, Paresh Kumar & Phan, Dinh Hoang Bach & Narayan, Seema & Bannigidadmath, Deepa, 2017. "Is there a financial news risk premium in Islamic stocks?," Pacific-Basin Finance Journal, Elsevier, vol. 42(C), pages 158-170.
    • Handle: RePEc:eee:pacfin:v:42:y:2017:i:c:p:158-170
    DOI: 10.1016/j.pacfin.2017.02.008
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    6. Dharani, M. & Hassan, M. Kabir & Paltrinieri, Andrea, 2019. "Faith-based norms and portfolio performance: Evidence from India," Global Finance Journal, Elsevier, vol. 41(C), pages 79-89.
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    15. Mehmet Asutay & Yumeng Wang & Alija Avdukic, 2022. "Examining the Performance of Islamic and Conventional Stock Indices: A Comparative Analysis," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(2), pages 327-355, June.
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