Herding behaviour in the Islamic bank market: evidence from the Gulf region

Yousaf, Imran and Alokla, Jassem (2022) Herding behaviour in the Islamic bank market: evidence from the Gulf region. Review of Behavioral Finance. ISSN 1940-5979

[img] PDF - Published Version
Restricted to SRO admin only

Download (311kB)

Abstract

Purpose
This study examines herding in Islamic bank equity markets under various market conditions (up/down, high/low trading and high/low volatility) and during events such as Organization of the Petroleum Exporting Countries (OPEC) meeting days, Ramadan, the Gulf Cooperation Council (GCC) crisis of 2017 and the COVID-19 pandemic. The authors also look at the impact of rising and falling oil prices on herding behaviour.

Design/methodology/approach
This study uses the model of Chang et al. (2000) to estimate herding behaviour in the Islamic bank markets.

Findings
First, the authors estimate herding at the GCC region level, and the results reveal an absence of herding under all market conditions and during all the events considered, except for the GCC crisis of 2017. Second, the authors investigate herding in four Gulf countries (Saudi Arabia, United Arab Emirates [UAE], Qatar and Kuwait) separately and find that herding is evident in all these countries during various market conditions. During Ramadan, herding appears in the Saudi Arabia and Kuwait Islamic bank equity markets. Herding is not prevalent during OPEC meeting days in any of the markets, whereas herding is evident in Saudi Arabia, UAE and Kuwait Islamic bank equity markets during the GCC crisis of 2017 and the COVID-19 pandemic. Lastly, the rising and falling oil prices do not influence herding at either GCC region or country level.

Practical implications
From the practitioner's perspective, this study provides useful insights for investors in Islamic banks and policymakers, in terms of asset pricing, portfolio diversification, trading strategies and market stability.

Originality/value
Many studies explore herding in the equity markets of Muslim majority countries, but not specifically in the Islamic bank market. This study fills this literature gap by comprehensively examining herding in Islamic bank equity markets under various market conditions (up/down, high/low trading and high/low volatility) and during events, such as OPEC meeting days, Ramadan, the GCC crisis of 2017 and the COVID-19 pandemic.

Item Type: Article
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 04 Apr 2022 08:32
Last Modified: 16 May 2022 10:47
URI: http://sro.sussex.ac.uk/id/eprint/105171

View download statistics for this item

📧 Request an update