BazEkon - The Main Library of the Cracow University of Economics

BazEkon home page

Main menu

Author
Senarathne Chamil W. (Wuhan University of Technology, Wuhan, China)
Title
Are Religious Believers Irrational: A Direct Test from an Efficient Market Hypothesis
Czy ludzie religijni są irracjonalni: bezpośredni test z efektywnej hipotezy rynkowej
Source
Nauki o Finansach / Uniwersytet Ekonomiczny we Wrocławiu, 2020, vol. 25, nr 1, s. 35-53, rys., tab., bibliogr. 113 poz.
Financial Sciences / Uniwersytet Ekonomiczny we Wrocławiu
Keyword
Religia, Irracjonalizm, Teoria zachowań ludzkich
Religion, Irrationalism, Theory of human behavior
Note
JEL Classification: G12, G14, I31, N30, Z12, Z13
streszcz., summ.
Abstract
Współczesna literatura nie oferuje ilościowego testu irracjonalnego zachowania ludzi, zwłaszcza biorąc pod uwagę nieracjonalność w odniesieniu do działalności gospodarczej. Artykuł analizuje rolę ludzi wierzących w prowadzeniu działalności gospodarczej. Forma efektywności rynku akcji została przyjęta jako przybliżenie do przetestowania zerowej hipotezy mówiącej, że wierzący są przeciętnie irracjonalni. Rezultaty badań sugerują, że rynki akcji w krajach religijnych są nieefektywne na poziomie "słabej formy". Dostarcza to dowodów prima facie na hipotezę, że wierzący są przeciętnie irracjonalni. W związku z tym zmiany cen akcji na tych rynkach papierów wartościowych można prognozować na podstawie wcześniejszych wzorców. Niski poziom dochodów i słabe wykształcenie są głównymi przyczynami rozwoju irracjonalności. Ponieważ irracjonalność skutkuje kosztami dla gospodarki, decydenci powinni opracować i wdrożyć bardziej solidne polityki i wytyczne dotyczące zmniejszania ubóstwa i wzbogacania edukacji na poziomie kraju.(abstrakt oryginalny)

The current literature does not offer a quantitative test of the irrational behaviour of people, especially taking a proxy for irrationality with reference to an economic activity. This paper examines the role of religious believers in carrying out economic activities. The form of stock market efficiency has been taken as a proxy for testing the null hypothesis that religious believers are irrational on average. The findings suggest that equity markets in religious countries are inefficient at 'weak form' level. This provides prima facie evidence for the hypothesis that religious believers are irrational on average. As such, the equity price changes of these stock markets can be forecast on the basis of past patterns. Poor income level and education are the main causes for developing irrationality. As these irrationalities cost economies, the policymakers should design and implement more robust policies and guidelines for poverty alleviation and the enrichment of education at country level.(original abstract)
Accessibility
The Library of Warsaw School of Economics
The Library of University of Economics in Katowice
The Main Library of the Wroclaw University of Economics
Full text
Show
Bibliography
Show
  1. Abdmoulah W. (2010), Testing the evolving efficiency of Arab stock markets, International Review of Financial Analysis, vol. 19, no. 1, pp. 25-34.
  2. Abrosimova N., Dissanaike G., Linowski D. (2002), Testing weak-form efficiency of the Russian stock market. In EFA 2002 Berlin Meetings Presented Paper, available online at https://papers.ssrn.com/ sol3/papers.cfm?abstract_id=302287.
  3. Abushammala S.N. (2011), Testing the weak form efficiency of Palestine exchange, International Journal of Economics and Finance, vol. 3, no. 6, pp. 244-253.
  4. Afego P. (2012), Weak form efficiency of the Nigerian stock market: An empirical analysis (1984-2009), International Journal of Economics and Financial Issues, vol. 2, no. 3, pp. 340-347.
  5. Al Ashikh A.I. (2012), Testing the weak-form of efficient market hypothesis and the day-of-the-week effect in Saudi stock exchange: Linear approach, International Review of Business Research Papers, vol. 8, no. 6, pp. 27-54.
  6. Alawadhi A. (2016), Essays on religious beliefs and stock market outcomes, Doctoral Dissertation, RMIT University, available at https://core.ac.uk/download/pdf/83608136.pdf.
  7. Albrecht S.L., Heaton T.B. (1984), Secularization, higher education, and religiosity, Review of Religious Research, vol. 26, no. 1, pp. 43-58.
  8. Alexeev V., Tapon F. (2011), Testing weak form efficiency on the Toronto Stock Exchange, Journal of Empirical Finance, vol. 18, no. 4, pp. 661-691.
  9. Angelov N. (2009), Testing the weak-form efficiency of the Bulgarian stock market, Discussion Paper, Bulgarian National Bank, available at https://www.bnb.bg/bnbweb/groups/public/documents/ bnb_publication/discussion_2009_71_en.pdf.
  10. Arewa A., Nwakanmaa P.C. (2014), Re-validating weak-form hypothesis in the Nigerian capital market: A comparative test analyses, International Business Research, vol. 7, no. 4, pp. 73-83.
  11. Audi R. (1991), Faith, belief, and rationality, Philosophical Perspectives, vol. 5, pp. 213-239.
  12. Awad I. Daraghma Z., (2009), Testing the weak-form efficiency of the Palestinian securities market, International Research Journal of Finance and Economics, no. 32, pp. 7-17.
  13. Ayentimi D.T., Mensah A.E., Naa-Idar F. (2013), Stock market efficiency of the Ghana stock exchange: An objective analysis, International Journal of Management, Economics and Social Sciences, vol. 2, no. 2, pp. 54-75.
  14. Bachelier L. (2011), Louis Bachelier's theory of speculation: the origins of modern finance, Princeton University Press available at https://books.google.com/books?hl=en&lr=&id=XcZwuHGRxsgC& oi=fnd&pg=PR7&dq=Louis+Bachelier's+theory+of+speculation:+the+origins+of+modern+ finance&ots=6jAUL_1AKQ&sig=2QfU6-Jj-PYczD-50UUiqwrpf0Y.
  15. Balkiz O. (2003), Testing informational market efficiency on Kuala Lumpur stock exchange, Journal Ekonomi Malaysia, Vol. 37, pp. 3-20.
  16. Banz R.W. (1981), The relationship between return and market value of common stocks, Journal of Financial Economics, vol. 9, no. 1, pp. 3-18.
  17. Basu S. (1977), Investment performance of common stocks in relation to their price earnings ratios: A test of the efficient market hypothesis, Journal of Finance, vol. 32, no. 3, pp. 663-682.
  18. Bible in One Year (2017), God's plans for your future, Commentary, available at https://www.bibleinoneyear. org/bioy/commentary/1034.
  19. Blanden J., Gregg P. (2004), Family income and educational attainment: a review of approaches and evidence for Britain, Oxford Review of Economic Policy, vol. 20, no. 2, pp. 245-263.
  20. Blau B.M. (2017), Religiosity and the volatility of stock prices: A cross-country analysis, Journal of Business Ethics, vol. 144, no. 3, pp. 609-621.
  21. Blau B.M. (2018), Does religiosity affect liquidity in financial markets?, Journal of Behavioral and Experimental Finance, vol. 19, pp. 72-83.
  22. Block L., Kramer T. (2009), The effect of superstitious beliefs on performance expectations, Journal of the Academy of Marketing Science, vol. 37, no. 2, pp. 161-169.
  23. Borges M.R. (2010), Efficient market hypothesis in European stock markets, European Journal of Finance, vol. 16, no. 7, pp. 711-726.
  24. Brams S.J. (1979), Faith versus rationality in the Bible: game-theoretic interpretations of sacrifice in the Old Testament, Applied Game Theory, Physica, Heidelberg, pp. 430-445.
  25. Buguk C., Brorsen B.W. (2003), Testing weak-form market efficiency: Evidence from the Istanbul Stock Exchange, International Review of Financial Analysis, vol. 12, no. 5, pp. 579-590.
  26. Chang E.C., Cheng J.W., Khorana A. (2000), An examination of herd behavior in equity markets: An international perspective, Journal of Banking Finance, vol. 24, no. 10, pp. 1651-1679.
  27. Chapell M.S., Overton W.F. (2002), Development of logical reasoning and the school performance of African American adolescents in relation to socioeconomic status, ethnic identity, and self-esteem, Journal of Black Psychology, vol. 28, no. 4, pp. 295-317.
  28. Charles A., Darné O. (2009), The random walk hypothesis for Chinese stock markets: Evidence from variance ratio tests, Economic Systems, vol. 33, no. 2, pp. 117-126.
  29. Cheung K.C., Andrew Coutts J. (2001), A note on weak form market efficiency in security prices: Evidence from the Hong Kong stock exchange, Applied Economics Letters, vol. 8, no. 6, pp. 407-410.
  30. Chishti M.F., Chaudhry A.F., Afzal A. (2016), Testing the efficiency of Pakistani stock market (psx): a case of kse-100 index, Gomal University Journal of Research, no. 4, pp. 13-19.
  31. Christie P., Gordon A. (1992), Politics, poverty and education in rural South Africa, British Journal of Sociology of Education, vol. 13, no. 4, pp. 399-418.
  32. Cuong P.K., Jian Z. (2014), Factors influencing individual investors' behavior: An empirical study of the Vietnamese stock market, American Journal of Business and Management, vol. 3, no. 2, pp. 77-94.
  33. Davis, K. (1949), Human society, Macmillan, New York
  34. De Long J.B., Shleifer A., Summers L.H., Waldmann R.J. (1990), Positive feedback investment strategies and destabilizing rational speculation, Journal of Finance, vol. 45, no. 2, pp. 379-395.
  35. Dima B., Milos L.R. (2009), Testing the efficiency market hypothesis for the Romanian stock market, Annales Universitatis Apulensis: Series Oeconomica, vol. 11, no. 1, pp. 402-415.
  36. Dong Loc T., Lanjouw G., Lensink R. (2010), Stock-market efficiency in thin-trading markets: the case of the Vietnamese stock market, Applied Economics, vol. 42, no. 27, pp. 3519-3532.
  37. Duarte-Duarte J.B., Pérez-Iñigo M., Manuel J., Sierra-Suárez K.J. (2014), Testing the efficiency market hypothesis for the Colombian stock market, Dyna, vol. 81, no. 185, pp. 100-106.
  38. Ellis A. (1980). Psychotherapy and atheistic values: A response to AE Bergin's Psychotherapy and religious values, Journal of Counseling and Clinical Psychology, vol. 48, pp. 635-639.
  39. Emerson R., Hall S.G., Zalewska-Mitura A. (1997), Evolving market efficiency with an application to some Bulgarian shares, Economics of Planning, vol. 30, no. 2-3, pp. 75-90.
  40. Evans-Pritchard E.E. (1965), Theories of primitive religion, Oxford University Press.
  41. Fama E.F. (1965), The behavior of stock-market prices, Journal of Business, vol. 38, no. 1, pp. 34-105.
  42. Ferguson H.B., Bovaird S., Mueller M.P. (2007), The impact of poverty on educational outcomes for children, Paediatrics Child Health, vol. 12, no. 8, pp. 701-706.
  43. Fifield G.M., Jetty J. (2008), Further evidence on the efficiency of the Chinese stock markets: A note, Research in International Business and Finance, vol. 22, pp. 351-361.
  44. Freud S. (2008), The future of an illusion, vol. 55, Penguin UK.
  45. Gilmore C.G., McManus G.M. (2003), Random-walk and efficiency tests of Central European equity markets, Managerial Finance, vol. 29, no. 4, pp. 42-61.
  46. Groenewold N. (1997), Share market efficiency: tests using daily data for Australia and New Zealand, Applied Financial Economics, vol. 7, no. 6, pp. 645-657.
  47. Groenewold N., Kang K.C. (1993), The semi strong efficiency of the Australian share market, Economic Record, Vol. 69, no. 4, pp. 405-410.
  48. Grullon G., Kanatas G., Weston J., (2009), Religion and corporate (mis) behavior, Working Paper, Rice University, available at http://www.ruf.rice.edu/~westonj/wp/Religion.pdf.
  49. Hall S., Urga G. (2002), Testing for ongoing efficiency in the Russian stock market, Emerging Markets Group, Discussion Paper, available at https://scholar.google.com/scholar?hl=en&as_sdt=0,5- &q=Testing+for+ongoing+efficiency+in+the+Russian+stock+market&btnG=.
  50. Hamid K., Suleman M.T., Ali Shah S.Z., Akas I., Shahid R. (2017), Testing the weak form of efficient market hypothesis: Empirical evidence from Asia-Pacific markets, International Research Journal of Finance and Economics, vol. 58, pp. 121-133.
  51. Hanushek E.A., Schwerdt G., Woessmann L., Zhang L. (2017), General education, vocational education, and labor-market outcomes over the lifecycle, Journal of Human Resources, vol. 52, no. 1, pp. 48-87.
  52. Hawking S. (2004), The science of second-guessing, New York Times magazine interview, December 12, 2004, available at https://www.nytimes.com/2004/12/12/magazine/the-science-of-secondguessing. html.
  53. Homayouni A. (2011), The role of personality traits and religious beliefs in tendency to addiction, Procedia- Social and Behavioral Sciences, vol. 30, pp. 851-855.
  54. Iannaccone L.R. (1997), Rational choice: Framework for the scientific study of religion, [in:] Rational Choice Theory and Religion: Summary and Assessment, ed. L.A. Young, Routledge, New York, pp. 25-42.
  55. Jamal M., Badawi J. (1993), Job stress among Muslim immigrants in North America: Moderating effects of religiosity, Stress and Health, vol. 9, no. 3, pp. 145-151.
  56. Janjua P.Z., Kamal U.A. (2011), The role of education and income in poverty alleviation: A cross-country analysis, Lahore Journal of Economics, vol. 16, no. 1, 143-172.
  57. Jefferis K., Smith G. (2005), The changing efficiency of African stock markets, South African Journal of Economics, vol. 73, no. 1, pp. 54-67.
  58. Keynes J.M. (1937), The general theory of employment, Quarterly Journal of Economics, vol. 51, no. 2, pp. 209-223.
  59. Khan A.Q., Ikram S., Mehtab M. (2011), Testing weak form market efficiency of Indian capital market: A case of national stock exchange (NSE) and Bombay stock exchange (BSE), African Journal of Marketing Management, Vol. 3, no. 6, pp. 115-127.
  60. Khoynezhad G., Rajaei A.R., Sarvarazemy A. (2012), Basic religious beliefs and personality traits, Iranian Journal of Psychiatry, vol. 7, no. 2, pp. 82-86.
  61. Kršikapa-Rašajski J., Rankov S.G. (2016), Testing weak form efficiency on the capital markets in Serbia, Megatrend Revija, vol. 13, no. 1, pp. 265-278.
  62. Lagoarde-Segot T., Lucey B.M. (2005), Stock market predictability in the MENA: evidence from new variance ratio tests and technical trade analysis, Discussion Paper, Trinity College Dublin, available at https://www.tcd.ie/triss/assets/PDFs/iiis/iiisdp92.pdf.
  63. Lee U. (1992), Do stock prices follow random walk?: Some international evidence, International Review of Economics and Finance, vol. 1, no. 4, pp. 315-327.
  64. Li X. (2001), China's evolving stock market efficiency reconsidered: The Kalman filter analysis, Working Paper, Massey University, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_ id=961108.
  65. Lima E.J.A., Tabak B.M. (2004), Tests of the random walk hypothesis for equity markets: Evidence from China, Hong Kong and Singapore, Applied Economics Letters, vol. 11, no. 4, pp. 255-258.
  66. Lo A.W., MacKinlay A.C. (1988), Stock market prices do not follow random walks: Evidence from a simple specification test, Review of Financial Studies, vol. 1, no. 1, pp. 41-66.
  67. Lo A.W., MacKinlay, A.C. (1989), The size and power of the variance ratio test in finite samples: A Monte Carlo investigation, Journal of Econometrics, vol. 40, no. 2, pp. 203-238.
  68. Maddox B. (2010), Marginal returns: rethinking mobility and educational benefit in contexts of chronic poverty, Compare, vol. 40, no. 2, pp. 213-222.
  69. Magnus F.J. (2008), Capital market efficiency: An analysis of weak-form efficiency on the Ghana Stock Exchange, Journal of Money, Investment and Banking, vol. 5, no. 5, pp. 5-13.
  70. Malkiel B.G. (1995), Returns from investing in equity mutual funds 1971 to 1991, Journal of Finance, Vol. 50, no. 2, pp. 549-572.
  71. Malkiel B.G. (2003), The efficient market hypothesis and its critics, Journal of Economic Perspectives, vol. 17, no. 1, pp. 59-82.
  72. Malkiel B.G., McCue K. (1985), A random walk down Wall Street, vol. 8, Norton, New York.
  73. Mandelbrot B.B. (1963), The variation of certain speculative prices, Journal of Business, vol. 36, no. 4, pp. 394-419.
  74. Maxym D. (2000), The efficient market hypothesis and the Ukrainian stock market, Master's Thesis, National University of Kyiv-Mohyla Academy, available at http://www.kse.org.ua/uploads/file/ library/2000/Dedov.pdf.
  75. McCrudden M.T., Barnes A. (2016), Differences in student reasoning about belief-relevant arguments: a mixed methods study, Metacognition and Learning, vol. 11, no. 3, pp. 275-303.
  76. McDaniel S.W., Burnett J.J. (1990), Consumer religiosity and retail store evaluative criteria, Journal of the Academy of Marketing Science, vol. 18, no. 2, pp. 101-112.
  77. McFarland M.J., Wright B.R., Weakliem D.L. (2010), Educational attainment and religiosity: Exploring variations by religious tradition, Sociology of Religion, vol. 72, no. 2, pp. 166-188.
  78. McGuire S.T., Omer T.C., Sharp N.Y. (2011), The impact of religion on financial reporting irregularities, The Accounting Review, vol. 87, no. 2, pp. 645-673.
  79. Milieska G. (2004), The evaluation of the Lithuanian stock market with the weak-form market efficiency hypothesis, Østfold University College, Halden Norway, Spring.
  80. Milionis A.E., Papanagiotou E. (2011), A test of significance of the predictive power of the moving average trading rule of technical analysis based on sensitivity analysis: application to the NYSE, the Athens Stock Exchange and the Vienna Stock Exchange, Implications for weak-form market efficiency testing, Applied Financial Economics, vol. 21, no. 6, pp. 421-436.
  81. Mlambo C., Biekpe N. (2007), The efficient market hypothesis: Evidence from ten African stock markets, Investment Analysts Journal, vol. 36, no. 66, pp. 5-17.
  82. Mobarek A., Fiorante A. (2014), The prospects of BRIC countries: Testing weak-form market efficiency, Research in International Business and Finance, vol. 30, pp. 217-232.
  83. Moldovan D. (2010), Testing the efficiency of the Romanian stock market. Development, Energy, Environment, Economics, pp. 378-381.
  84. Moltafet G., Mazidi M., Sadati S. (2010), Personality traits, religious orientation and happiness, Procedia- Social and Behavioral Sciences, vol. 9, pp. 63-69.
  85. Moshman, D. (1990), Rationality as a goal of education, Educational Psychology Review, vol. 2, no. 4, pp. 335-364.
  86. Mynhardt R.H., Plastun A. (2013), The overreaction hypothesis: The case of Ukrainian stock market, Corporate Ownership Control, vol. 11, no. 1, pp. 406-422.
  87. Nambissan G.B. (2010), The global economic crisis, poverty and education: a perspective from India, Journal of Education Policy, vol. 25, no. 6, pp. 729-737.
  88. Narayan P.K., Smyth R. (2004), Is South Korea's stock market efficient?, Applied Economics Letters, vol. 11, no. 11, pp. 707-710.
  89. Ojah K., Karemera D. (1999), Random walks and market efficiency tests of Latin American emerging equity markets: a revisit, Financial Review, vol. 34, no. 2, pp. 57-72.
  90. Phan K.C., Zhou J. (2014), Market efficiency in emerging stock markets: A case study of the Vietnamese stock market, IOSR Journal of Business and Management, vol. 16, no. 4, 61-73.
  91. Pošta V. (2008), Estimating the dynamics of weak efficiency on the Prague stock exchange using the Kalman filter, Czech Journal of Economics and Finance (Finance a uver), vol. 58, no. 05-06, pp. 248-260.
  92. Rehman A.U., Masood M., Arshed S., Shah S.Z.A. (2012), Evaluation of weak form of efficiency: an empirical study of emerging south Asian stock markets, International Research Journal of Finance and Economics, vol. 88, pp. 124-131.
  93. Roll R. (1988), R2, Journal of Finance, vol. 43, no. 3, pp. 541-566.
  94. Rose P., Dyer C. (2008), Chronic poverty and education: a review of literature, Working Paper, Chronic Poverty Research Centre, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_ id=1537105.
  95. Ryoo H.J., Smith G. (2002), Korean stock prices under price limits: Variance ratio tests of random walks, Applied Financial Economics, vol. 12, no. 8, pp. 545-553.
  96. Schieman S. (2011), Education and the importance of religion in decision making: Do other dimensions of religiousness matter?, Journal for the Scientific Study of Religion, vol. 50, no. 3, pp. 570-587.
  97. Schneider H., Krieger J., Bayraktar A. (2011), The impact of intrinsic religiosity on consumers' ethical beliefs: Does it depend on the type of religion? A comparison of Christian and Moslem consumers in Germany and Turkey, Journal of Business Ethics, vol. 102, no. 2, pp. 319-332.
  98. Scudder E. (1897), Seeking after god, The Wesleyan-Methodist Magazine, vol. 120, pp. 426-426.
  99. Seiler M.J., Rom W. (1997), A historical analysis of market efficiency: Do historical returns follow a random walk?, Journal of Financial and Strategic Decisions, vol. 10, no. 2, pp. 49-57.
  100. Shaker A.T. (2013), Testing the weak-form efficiency of the Finnish and Swedish stock market, European Journal of Business and Social Sciences, Vol. 2, no. 9, pp. 176-185.
  101. Shiller R.C. (2000), Irrational exuberance, Philosophy Public Policy Quarterly, vol. 20, no. 1, pp. 18-23.
  102. Shiller R.J., Fischer S., Friedman B.M. (1984), Stock prices and social dynamics, Brookings Papers on Economic Activity, vol. 1984, no. 2, pp. 457-510.
  103. Smith G. (2012), The changing and relative efficiency of European emerging stock markets, The European Journal of Finance, vol. 18, no. 8, pp. 689-708.
  104. Sohail A., Murtaza G., Habib Q., Azeem M. (2014), Efficiency of south Asian capital markets: an empirical analysis, European Journal of Business and Management, vol. 6, no. 11, pp. 30-33.
  105. Tobin J. (1984), On the efficiency of the financial system, Lloyd's Banking Review, vol. 153, pp. 1-15.
  106. Trueman B. (1994), Analyst forecasts and herding behavior. The Review of Financial Studies, vol. 7, no. 1, pp. 97-124.
  107. Van Biema D., Chu J. (2006), Does God want you to be rich?, Time Magazine, available at http://content. time.com/time/magazine/article/0,9171,1533448,00.html.
  108. Vitell S.J., Paolillo J.G. (2003), Consumer ethics: The role of religiosity, Journal of Business Ethics, Vol. 46, no. 2, pp. 151-162.
  109. Weaver G.R., Agle B.R. (2002), Religiosity and ethical behavior in organizations: A symbolic interactionist perspective, Academy of Management Review, vol. 27, no. 1, pp. 77-97.
  110. Wilson E. (1975): Sociobiology: The new synthesis. Cambridge, MA: Belknap Press of Harvard University Press.
  111. Worthington A.C., Higgs H. (2003), Tests of random walks and market efficiency in Latin American stock markets: An empirical note, Discussion Paper, available at http://eprints.qut.edu.au/328/.
  112. Worthington A.C., Higgs H. (2004), Random walks and market efficiency in European equity markets, Global Journal of Finance and Economics, vol. 1, no.1, pp. 59-78.
  113. Worthington A.C., Higgs H. (2009), Efficiency in the Australian stock market, 1875-2006: a note on extreme long-run random walk behaviour, Applied Economics Letters, Vol. 16, no. 3, pp. 301-306.
Cited by
Show
ISSN
2080-5993
Language
eng
URI / DOI
http://dx.doi.org/10.15611/fins.2020.1.04
Share on Facebook Share on Twitter Share on Google+ Share on Pinterest Share on LinkedIn Wyślij znajomemu