HERDING BEHAVIOUR IN ARAB COUNTRIES: RELATIONSHIP BETWEEN HALAL AND NON-HALAL PRODUCTS

Purpose — The global halal economy has become more manifest in recent decades,and there is an increasing relationship between halal and non-halal products in Muslim countries. This study examines the herding behaviour towards halal products in some Muslim-majority Arab countries.

Design/Methodology/Approach — The study applies the following methods of estimation—quantile regression and Dynamic Conditional Correlation Generalised Autoregressive Conditional Heteroscedasticity (DCC-GARCH) models—over the period ranging from 1 January 2017 to 31 March 2024.

Findings — Using daily data of stock-listed companies for both halal and non-halal products, the results show evidence of asymmetry between downward and upward market conditions, and asymmetry between the periods before and after the COVID19 pandemic. In addition, it is found that the halal sector herds around the non-halal sector in the sampled Arab countries. When estimating the equation of herding by theDCC-GARCH model, it is concluded that there is evidence of a dynamic conditional correlation in both the short-term and long-term between the dispersion of non-halal products and herding behaviour in halal products in the Muslim-majority Arab countries.

Originality/Value — This paper studies the contextual relationship between halal and non-halal products and their effects on herding behaviour in some Muslim markets. Because of the paucity of research papers that analyse halal or Muslim investors’behaviour, this study is devoted to the analysis of herding behaviour of Muslim investors in halal products and the impact of non-halal products on this bias.

Research Limitations/Implications — This paper includes some limitations that may affect the accuracy of the findings. First, the results are obtained from seven Arab Muslim countries and may not be generalised to all Arab countries. Second, the sample is dominated by Middle Eastern countries, comprising five out of the seven Arab countries.

Practical Implications — Herding behaviour in the framework of halal and non-halal products can be significant for investors, policymakers, and consumers. The relationship between halal and non-halal products in Muslim countries can have an important contribution to moderate behaviour in the financial markets