Religious holidays and analysts forecast optimism: Evidence from MENA countries

Abstract

We investigate the effect of religious holidays on analyst recommendation on stock markets in MENA countries stock markets (Morocco, United Arab Emirates, Saudi Arabia, Jordan, Kuwait, Lebanon, Qatar, Algeria, Bahrain) for the period of 2004 to 2015. The result shows that on pre-holidays, analysts tend to issue pessimistic recommendations, and issue optimistic recommendations on post-holidays . Prior literature on day-of –the week effect is consonant with our results which document an increase in stock prices during the week, and a decrease in stock prices over the weekend. We argue that analysts can benefit from the upward trend in stock prices during Post-Holidays by issuing an optimistic recommendation. Analysts may as well benefit from the downward trend in stock prices by issuing pessimistic recommendations on pre-holidays. We also exhibit that our results are more consistent among less experienced analysts and in firms with greater information uncertainty.