Investor Herding Behaviour in Arab Muslim Stock Markets: An Empirical Analysis of the Influence of Non-Halal Products on Halal Investment Decisions
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Abstract
The global halal economy has grown substantially, yet the relationship between halal and non-halal market dynamics within Muslim-majority contexts remains underexplored. This study investigates investor herding behaviour toward halal products in seven Arab-Muslim countries, namely Egypt, Jordan, Morocco, Qatar, Saudi Arabia, Tunisia, and the United Arab Emirates, with particular focus on how non-halal market dynamics influence halal sector investment decisions. Employing quantile regression and the Dynamic Conditional Correlation Generalised Autoregressive Conditional Heteroscedasticity (DCC-GARCH) model on daily stock market data from January 2017 to March 2024, the findings reveal statistically significant asymmetries between downward and upward market conditions and between pre- and post-COVID-19 periods. Empirical results confirm that halal sector herding behaviour is significantly oriented around non-halal sector dynamics, while DCC-GARCH estimation establishes dynamic conditional correlations in both short- and long-term dimensions between non-halal product dispersion and halal investor herding across the sampled markets. This study contributes originally to the literature by addressing a critical gap concerning Muslim investor behaviour in halal financial markets and the cross-sectoral influence of non-halal dynamics on investment bias. The findings carry important implications for investors, policymakers, and market regulators seeking to moderate irrational investment behaviour in Muslim-majority financial markets. Generalisability is acknowledged to be constrained by the geographic concentration of the sample, with five of seven countries drawn from the Middle Eastern region.
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