The Impact of Religious Experience on Financial Markets

In spite of the important role religion plays in peoples ’ lives, its impact on financial markets is seldom researched. This study examines the effect of religious experience during the Muslim holy days of Ramadan and Ashoura on the daily returns and trading volumes of 17 Muslim financial markets. Muslim holy days are especially conducive to isolating the elusive effect of faith and decoupling it from potential contaminants. The study documents statistically significant drops in the trading volume and changes in daily stock returns associated with religious experiences on these holy days. The effect on returns is not unidirectional as Ramadan yields a positive impact on daily returns while Ashoura is associated with a negative effect. Ramadan’s more sacred days are associated with a higher magnitude effect culminating on its holiest day, Ramadan 27th. The study utilizes the heterogeneity of worship intensity within the month of Ramadan to validate that the documented effect is indeed a result of religious experience rather than non-faith aspects of the holy days