The Influence of Muslim Holidays on Stock Returns of the Kenyan Listed Firms’

Abstract

This research aims to show the connection between Muslim holidays^[1] and stock returns. The ‘event study methodology’ was employed and using a Kenyan sample of 20 listed firm-year data observations for the years 2013–2014 of the Nairobi Securities Exchange (NSE) 20-share index price movements, the authors analyze the effects of Muslim holidays[2] on stock returns. The results show that six out of the ten holidays studied had a positive effect on stock returns. The findings demonstrate that Muslim holidays affect stock returns of companies listed at the NSE. It can be inferred from the findings that the stock market is influenced by investor sentiments and dispositions. The study showed that, at some point, when investors ‘fail’ to be rational, this causes a stock market anomaly at the NSE. The study points out a conspicuous and important gap in knowledge and suggests recommendations for regulatory authorities in the light of the findings.

Keywords: Efficient capital markets, investor rationality, Muslim holidays, market anomaly, stock market investment

[1] These are religious practices whose aim, like all other fundamentals of Islam, is to imbibe piety and self-righteousness, and promote the spirit of sacrifice for a right cause.

[2] In this study, the words holy day and holiday have been used interchangeably hence mean one and the same thing.