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Is there a financial news risk premium in Islamic stocks?
journal contributionposted on 2017-04-01, 00:00 authored by Paresh Narayan, D H B Phan, S Narayan, Deepa Bannigidadmath
This paper examines whether there is a financial news risk premium in Islamic stocks. We utilize a unique data set that includes over 2000 stocks listed on multiple markets. Our main findings are twofold. First, simple trading strategies that buy high news sensitive portfolios and sell low news sensitive portfolios generate annualized returns of 4.92% to 12.48%. Second, we perform a momentum trading strategy for high and low news sensitive stocks and find that while both portfolios are profitable, investing in a portfolio of high news sensitive stocks generates an additional profit of 5.60% per annum. Our results are robust to different composition of portfolios, different momentum portfolio rules, and market risk-adjusted excess returns.