Abstract
This paper investigates the role of religious philosophy in determining investor behaviour by examining differences in herding across Shariah and non-Shariah compliant firms in the global energy market. Our sample comprises 2501 globally listed energy equities from 10 April 2019 to 08 April 2020 from the Refinitv Eikon database, which also flags firms as compliant or otherwise with Shariah or Islamic law. Using closing price data for the selected firms, we analyze herding behaviour across the two groups, in addition to various firm and market characteristics such as size, profitability, analyst recommendations about future performance and up and down market days. Our results suggest herding in both Shariah and non-Shariah-compliant energy firms, and on down market days in particular. Cross-sectional tests indicate higher herding in larger and more-profitable Shariah firms, and those with positive analyst forecasts for the future, which is consistent with pressure-driven behaviour to maintain performance. In particular, we find that the COVID-19 pandemic does not significantly alter herding behaviour for the sample firms.
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