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Does financial news predict stock returns? New evidence from Islamic and Non-Islamic stocks

Narayan, Paresh and Bannigidadmath, Deepa 2015, Does financial news predict stock returns? New evidence from Islamic and Non-Islamic stocks, Pacific-Basin finance journal, vol. 42, pp. 1-22, doi: 10.1016/j.pacfin.2015.12.009.

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Title Does financial news predict stock returns? New evidence from Islamic and Non-Islamic stocks
Author(s) Narayan, Paresh
Bannigidadmath, Deepa
Journal name Pacific-Basin finance journal
Volume number 42
Start page 1
End page 22
Total pages 22
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2015-09-15
ISSN 0927-538X
Keyword(s) Islamic stocks
Financial news
Trading strategy
Social Sciences
Business, Finance
Business & Economics
Summary The paper extends the time-series financial news data set constructed by Garcia (2013) and uses it to examine whether financial news predicts returns of Islamic stocks differently compared to non-Islamic (conventional) stocks. We find that they do. First, while both positive and negative worded news predict most Islamic and conventional stock returns, positive words have a larger impact on both types of stock returns. Second, shock to returns from financial news reverses only in part for some stocks. Third, for a mean-variance investor, investing in Islamic stocks is relatively more profitable than investing in the corresponding conventional stocks. Fourth, we show that profits are robust to a range of time-series risk factors, namely, market risk, size-based risk, and momentum-induced risk.
Language eng
DOI 10.1016/j.pacfin.2015.12.009
Field of Research 140207 Financial Economics
140305 Time-Series Analysis
1502 Banking, Finance And Investment
1501 Accounting, Auditing And Accountability
Socio Economic Objective 910103 Economic Growth
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, Elsevier
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Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Graduate School of Business
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