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Ramadan Effect (Maybe Can Extrapolate)

Research suggests that the euphoria derived from Ramadan could influence investor behavior in Islamic markets. Ramadan is one of the most celebrated religious rituals in the world and consequently, this positively perceived ritual can affect the investor psychology during the time of observance. This strategy applies this research by investing in country ETFs where the proportion of the population professing Muslim faith exceeds 50% during the month. When not invested, the investor is invested in cash. While the strategy on Quantpedia invests in indices of 14 countries, the algorithm below invests in the 8 countries whose indices are available through QuantConnect. The strategy below used a custom data set of Ramadan dates that I consolidated.

While this strategy targets the euphoria of Ramadan, maybe there is alpha in other rituals, both religious and non-religious. The backtest shows that there is a consistent increase in markets during this period. Maybe there are investment opportunities during Diwali in India, Christmas in America, Carnaval in Brazil, etc. If strategies like these can be profitable for the 1 month that they are active, maybe a portfolio can be created to capitalize on different rituals around the world each month. I will be looking into this more.

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Trading for one month a year, the Ramadan Effect in your backtest yields 0.721% annual returns. But the benchmark returned 268%. over 112 months of your backtest, which is an average of 1.17% per month. Although profitable, doesnt the Ramadan Effect underperform the benchmark?

Interesting theory though.

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Relative to fractional time invested it over performs. It might be a good

long term alpha signal for Alpha Streams.
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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


Update Backtest





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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


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