Dubai: The Ramadan Phenomena

The Ramadan phenomena is a long held belief that transactional activity for both the real estate and the equity markets plummet; as a consequence any price action signals that emanate during this month is exaggerated on account of amplified price volatility on thin volumes.

A price analysis over the last 7 years reveals Ramadan is no different to the rest of the year, negating the concept that price action is sluggish (0.6% average change, which is exactly the average monthly change for the rest of the months of the year).

When the same analysis was applied to transactional activity a 16% dip was witnessed. However, a common mistake when analyzing transactional activity is that there is usually a 30 day lag between the MOU and the transfer to be registered. A comparison between Ramadan transactions and 30 days after shows a difference of 1%, highlighting the minimal effect of Ramadan.

A similar analysis in the DFM was conducted which revealed no consistent pattern in price change in the month of Ramadan compared to the average of other months in the year (0.6% vs. 0.3%). In terms of capital market transactional activity, there is a systematic decline of 6.7%, compared to other months; however this is largely due to the number of trading hours being reduced.

To download the full report click here: http://blog.reidin.com/PublicReports/Ramadan_Phenomena.pdf