Credit quality implied momentum profits for Islamic stocks

Paresh Kumar Narayan, Seema Narayan, Dinh Hoang Bach Phan, Kannan Sivananthan Thuraisamy, Vuong Thao Tran

Research output: Contribution to journalArticleResearchpeer-review

30 Citations (Scopus)

Abstract

Using a sample of Asia-Pacific Islamic stocks we show that momentum profits exist regardless of the credit quality of stocks. A portfolio of low credit quality stocks earns 4.68% per annum more than a portfolio of high credit quality stocks. Market risk factors explain all momentum profits, suggesting that profits are compensation for risks. Post-holding period analysis suggests strong evidence of return reversal, consistent with the behavioral hypothesis. Our main results are also robust to sub-samples of data characterized by the recent global financial crisis and to Islamic and non-Islamic based market risk factors.

Original languageEnglish
Pages (from-to)11-23
Number of pages13
JournalPacific Basin Finance Journal
Volume42
DOIs
Publication statusPublished - Apr 2017
Externally publishedYes

Keywords

  • Abnormal returns
  • Islamic stocks
  • Mispricing
  • Portfolio
  • Profitability
  • Risk factors

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