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The Impact of COVID-19-related Events on Indonesian Composite and Sectoral Index

In: Quantitative Analysis of Social and Financial Market Development

Author

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  • Muhammad Hasan Ghazali
  • Taufik Faturohman

Abstract

This study uses an event study approach which is the development of the efficient market hypothesis theory. First, the random walk test was conducted on the Jakarta Composite Index (JCI) to test the efficiency in the weak form. Furthermore, event study analysis was carried out on JCI and nine sectoral indices to determine the impact of COVID-19 related events on price movements. The study found that JCI prices follow a random walk pattern so that the stock market in Indonesia is efficient, at least in a weak form. In the event study testing, only events related to the first confirmed case of COVID-19 and the implementation of large-scale social restriction in Indonesia affected the composite index. From a sectoral point of view, only the event of Jakarta’s call center had no impact on price changes in the sectoral index. Thus, each index had a different effect throughout the event. The reaction seen from the movement of prices for the composite and sectoral index to the public information explains that the condition of the Indonesian capital market is efficient, at least in semi-strong form.

Suggested Citation

  • Muhammad Hasan Ghazali & Taufik Faturohman, 2022. "The Impact of COVID-19-related Events on Indonesian Composite and Sectoral Index," International Symposia in Economic Theory and Econometrics, in: Quantitative Analysis of Social and Financial Market Development, volume 30, pages 47-60, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-038620220000030004
    DOI: 10.1108/S1571-038620220000030004
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    More about this item

    Keywords

    Jakarta Composite Index; COVID-19; efficient market hypothesis; event study; abnormal return; capital market; G14; M20; N15;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East

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