Date of Award


Degree Type


Degree Name

Doctor of Philosophy in Business Administration




Business Administration

First Advisor

Shingo Goto


The purpose of this dissertation is to investigate the determinants of expected returns in Saudi Stock Markets. In the first manuscript, we examine how lottery-like stocks are valued in Saudi Arabia where stock trades are dominated by Muslim individuals who have never experienced gambles/ lotteries. We find significant underperformance of lottery-like stocks in Saudi Arabia, especially among those with high stock turnover. We discuss a few channels through which investors in Saudi Arabia overpay for lottery-like characteristics despite their strong moral oppositions to gambles/lotteries.

The second manuscript aims to shed new lights into the factors that drive the cross-sectional variation of stock returns in Saudi stock market. This manuscript adds to the existing research in the following three ways. First, we show that stocks with lottery-like payoffs, as measured by the maximum daily return over the past one month (MAX), draw strong attention from retail investors as measured by an increased investor base and increased liquidity, after controlling for Islamic classification. MAX and the Islamic classification capture different aspects of investors’ attention/ recognition. MAX effect thus complements the effect of Shariah compliance by drawing transitory attention of retail investors. Second, we document the presence of significant profitability effect in the cross-section of average returns in Saudi stock market. Third, we show that the significant profitability effect in Saudi stock market is concentrated in a group of firms with high maximum daily returns (MAX) over the past month, i.e., those with lottery-like features. The Islamic classification, however, does not exhibit this moderating effect on the profitability effect in stock returns.

The third manuscript examines whether Islamic classification and MAX, defined as the maximum daily return over the past one month, exhibit a higher future crash risk in Saudi Stock Market. Saudi Stock Market was chosen because of some of its unique characteristics, such as the nature of its investors and the prevalence of Islamic investment models, and due to the importance of Islamic classification and MAX in this market, both which make it worth examining. The evidence shows that MAX is negatively associated with future crash risk after controlling for other predictors of crash risk. In contrast, the relation between Islamic classification and future stock price crash risk is weak.



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