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Momentum strategies for Islamic stocks

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  • Narayan, Paresh Kumar
  • Phan, Dinh Hoang Bach

Abstract

We estimate momentum profits for a large portfolio of Islamic stocks, control for stock characteristics and the state-of-the-market, explore seasonal patterns, and examine the determinants of profits. We discover ample evidence that momentum strategies work for Islamic stocks, but are stock characteristic-dependent, that up and down phases of the market offer different profits, and that there is a January effect on profits. We also find that the market risk factors – namely, excess market returns, value, size, and betting-against-beta factors – and macroeconomic risk factors do explain profits. We conclude that the profitability of Islamic stocks is merely compensation for risks and is not due to mispricing.

Suggested Citation

  • Narayan, Paresh Kumar & Phan, Dinh Hoang Bach, 2017. "Momentum strategies for Islamic stocks," Pacific-Basin Finance Journal, Elsevier, vol. 42(C), pages 96-112.
    • Handle: RePEc:eee:pacfin:v:42:y:2017:i:c:p:96-112
    DOI: 10.1016/j.pacfin.2016.05.015
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