Fasting and Finance: The Impact of Daylight Hours during Ramadan on Global Stock Market Returns

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Salehi, Mojtaba | 2025

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 58376 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Ebrahimnejad, Ali
Abstract:
This paper examines the impact of Ramadan fasting hours on stock market returns across 59 countries during the period 1980–2011. Exploiting cross-country variation in geographic latitude and daylight duration as an exogenous source of fasting intensity, we identify behavioral mechanisms underlying market performance during Ramadan. The results indicate that longer fasting hours are generally associated with lower monthly and annual returns. However, in Muslim-majority countries, this adverse effect is mitigated and, in some cases, reversed into positive returns. Seasonal analyses further reveal that the positive impact is more pronounced during summer months, and that extended fasting hours are associated with lower monthly stock return dispersion in Muslim-populated markets. Two channels provide plausible explanations: (i) the risk and information production channel, in which reduced trading activity and information generation elevate risk and alter return expectations, and (ii) the optimism channel, whereby heightened collective sentiment and behavioral alignment among investors foster herding and increase demand for equities
Keywords:
Stock Market ; Panel Data ; Risk Assessment ; Return Volatility ; Ramadan Fasting ; Investors Behavior ; Cultural and Religious Effects