Does faith move stock markets? Evidence from Saudi Arabia

•This paper investigates the effects of religious beliefs on stock prices.•It is found that Shariah-compliant stocks have higher returns and volatility then their non-Shariah compliant counterparts.•Findings support the viewpoint that the religious tenets have important bearing on portfolio choices of investors.

This paper investigates the effects of religious beliefs on stock prices. Our findings support the viewpoint that the religious tenets have important bearing on portfolio choices of investors. It is found that Shariah-compliant stocks have higher return and volatility than their non-Shariah compliant counterparts.