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Halal Stock Designation and Impact on Price and Trading Volume

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Author Info
Bacha, Obiyathulla I.
Abdullah, Mimi H.

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Abstract

This paper examines the impact of the Malaysian Syariah Advisory Council’s (SAC) decision on stock eligibility. Specifically, we address four questions related to returns and trading volume of stocks in relation to the SAC’s decision to add or delete a stock to their list of halal stocks. Overall, our findings suggest that inclusions experience a positive impact while deletions negative. Our sample of 39 inclusions showed positive MCAR and increased trading volume. The price impact however was delayed with significant positive MCARs in the 30 and 60 day window periods following announcement. The impact on trading volume appears immediate but short lived. Our Sample of 21 stocks deleted from SAC list experienced negative MCAR and reduced trading volume. These were however statistically significant only in the 60 day window post announcement.

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File URL: http://mpra.ub.uni-muenchen.de/12728/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12728.

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Date of creation: Jun 2001
Date of revision: Feb 2001
Publication status: Published in The Journal of Accounting, Commerce & Finance – Islamic Perspective 1.5(2001): pp. 66-97
Handle: RePEc:pra:mprapa:12728

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Related research
Keywords: Shariah compliance; Islamic stock designation; effect on returns and traded volume.;

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
G29 - Financial Economics - - Financial Institutions and Services - - - Other

References listed on IDEAS
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  1. Beneish, Messod D. & Gardner, John C., 1995. "Information Costs and Liquidity Effects from Changes in the Dow Jones Industrial Average List," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(01), pages 135-157, March. [Downloadable!]
  2. Harris, Lawrence E & Gurel, Eitan, 1986. " Price and Volume Effects Associated with Changes in the S&P 500 List: New Evidence for the Existence of Price Pressures," Journal of Finance, American Finance Association, vol. 41(4), pages 815-29, September. [Downloadable!] (restricted)
  3. Erwin, Gayle R & Miller, James M, 1998. "The Liquidity Effects Associated with Addition of a Stock to the S&P 500 Index: Evidence from Bid/Ask Spreads," The Financial Review, Eastern Finance Association, vol. 33(1), pages 131-46, February.
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This page was last updated on 2009-12-16.

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