IDEAS home Printed from https://ideas.repec.org/a/eco/journ2/2021-03-19.html
   My bibliography  Save this article

The Effect of the COVID-19 Pandemic on Stock Prices with the Event Window Approach: A Case Study of State Gas Companies, in the Energy Sector

Author

Listed:
  • Suripto

    (Department of Business Administration, Faculty of Social and Political Science, Lampung University, Indonesia,)

  • Supriyanto

    (Department of Business Administration, Faculty of Social and Political Science, Lampung University, Indonesia.)

Abstract

Stock price data at State Gas Company is defined as the time-series data comprising varying volatility and heteroscedasticity. One of the best models used to solve the problem of heteroscedasticity is the GARCH (generalized autoregressive conditional heteroscedasticity) model. Therefore, this study aims to build the most suitable model for predicting the 186 days before and 176 days after the Covid-19 pandemic, as well as to provide recommendations to reduce the impact of daily stock price movements. Data were obtained by examining the daily stock price data in Indonesian National Gas Companies from 2019 to 2020. The study also discusses the Event Window, with the best model identified as AR (1) -GARCH (1,1). The result showed that an error of less than 0.0015 is AR (1) - GARCH (1,1), provided the best model for price forecasting of Indonesian National Gas Companies.

Suggested Citation

  • Suripto & Supriyanto, 2021. "The Effect of the COVID-19 Pandemic on Stock Prices with the Event Window Approach: A Case Study of State Gas Companies, in the Energy Sector," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 155-162.
    • Handle: RePEc:eco:journ2:2021-03-19
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijeep/article/download/10999/5799
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijeep/article/view/10999/5799
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chan, Kalok & Fong, Wai-Ming, 2000. "Trade size, order imbalance, and the volatility-volume relation," Journal of Financial Economics, Elsevier, vol. 57(2), pages 247-273, August.
    2. Claudio Morana, 2017. "The US Dollar/Euro Exchange Rate: Structural Modeling and Forecasting During the Recent Financial Crises," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 36(8), pages 919-935, December.
    3. repec:cup:cbooks:9781107034662 is not listed on IDEAS
    4. Chia Chun Lo & Konstantinos Skindilias & Andreas Karathanasopoulos, 2016. "Forecasting Latent Volatility through a Markov Chain Approximation Filter," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 35(1), pages 54-69, January.
    5. Andrew A. Weiss, 1984. "Arma Models With Arch Errors," Journal of Time Series Analysis, Wiley Blackwell, vol. 5(2), pages 129-143, March.
    6. Brooks,Chris, 2014. "Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9781107661455, December.
    7. Pinglin He & Yulong Sun & Ying Zhang & Tao Li, 2020. "COVID–19’s Impact on Stock Prices Across Different Sectors—An Event Study Based on the Chinese Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(10), pages 2198-2212, August.
    8. repec:eco:journ2:2017-04-21 is not listed on IDEAS
    9. Li, Yan & Liang, Chao & Ma, Feng & Wang, Jiqian, 2020. "The role of the IDEMV in predicting European stock market volatility during the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 36(C).
    10. Willy Arafah & Lucky Nugroho & Rowlan Takaya & Soeharjoto Soekapdjo, 2018. "Marketing Strategy for Renewable Energy Development In Indonesia Context Today," International Journal of Energy Economics and Policy, Econjournals, vol. 8(5), pages 181-186.
    11. Siti Inayatul Faizah & Uus Ahmad Husaeni, 2018. "Development of Consumption and Supplying Energy in Indonesia s Economy," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 313-321.
    12. Worawuth Kongsilp & Cesario Mateus, 2017. "Volatility risk and stock return predictability on global financial crises," China Finance Review International, Emerald Group Publishing Limited, vol. 7(1), pages 33-66, February.
    13. Lyócsa, Štefan & Baumöhl, Eduard & Výrost, Tomáš & Molnár, Peter, 2020. "Fear of the coronavirus and the stock markets," Finance Research Letters, Elsevier, vol. 36(C).
    14. Ortmann, Regina & Pelster, Matthias & Wengerek, Sascha Tobias, 2020. "COVID-19 and investor behavior," Finance Research Letters, Elsevier, vol. 37(C).
    15. Beaver, William & Lambert, Richard & Morse, Dale, 1980. "The information content of security prices," Journal of Accounting and Economics, Elsevier, vol. 2(1), pages 3-28, March.
    16. Hassan Tawakol A. Fadol, 2020. "Study the Possibility of Address Complex Models in Linear and Non-Linear Causal Relationships between Oil Price and GDP in KSA: Using the Combination of Toda-Yamamoto, Diks-Panchenko and VAR Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 672-678.
    17. Robert Fildes & Paul Goodwin, 2007. "Against Your Better Judgment? How Organizations Can Improve Their Use of Management Judgment in Forecasting," Interfaces, INFORMS, vol. 37(6), pages 570-576, December.
    18. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    19. Singh, Amanjot, 2020. "COVID-19 and safer investment bets," Finance Research Letters, Elsevier, vol. 36(C).
    20. Hikmat H. Ali & Fahmi A. Abu Al-Rub & Bashar Shboul & Hind Al Moumani, 2020. "Evaluation of Near-net-zero-energy Building Strategies: A Case Study on Residential Buildings in Jordan," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 325-336.
    21. Muhammad Alishahdani Ibrahim & Rita Myrna & Ira Irawati & J.B. Kristiadi, 2018. "Tax Policy in Indonesian Energy Sectors: An Overview of Tax Amnesty Implementation," International Journal of Energy Economics and Policy, Econjournals, vol. 8(4), pages 234-236.
    22. Just, Małgorzata & Echaust, Krzysztof, 2020. "Stock market returns, volatility, correlation and liquidity during the COVID-19 crisis: Evidence from the Markov switching approach," Finance Research Letters, Elsevier, vol. 37(C).
    23. Serdar Neslihanoglu & Vasilios Sogiakas & John H. McColl & Duncan Lee, 2017. "Nonlinearities in the CAPM: Evidence from Developed and Emerging Markets," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 36(8), pages 867-897, December.
    24. Weron, Rafal & Misiorek, Adam, 2008. "Forecasting spot electricity prices: A comparison of parametric and semiparametric time series models," International Journal of Forecasting, Elsevier, vol. 24(4), pages 744-763.
    25. Tiago Silveira Gontijo & Alexandre de C ssio Rodrigues & Cristiana Fernandes De Muylder & Jefferson Lopes la Falce & Thiago Henrique Martins Pereira, 2020. "Analysis of Olive Oil Market Volatility using the ARCH and GARCH techniques," International Journal of Energy Economics and Policy, Econjournals, vol. 10(3), pages 423-428.
    26. K. Hsieh & P. Ritchken, 2005. "An empirical comparison of GARCH option pricing models," Review of Derivatives Research, Springer, vol. 8(3), pages 129-150, December.
    27. Choi, Sun-Yong, 2020. "Industry volatility and economic uncertainty due to the COVID-19 pandemic: Evidence from wavelet coherence analysis," Finance Research Letters, Elsevier, vol. 37(C).
    28. Erica Virginia & Josep Ginting & Faiz A.M. Elfaki, 2018. "Application of GARCH Model to Forecast Data and Volatility of Share Price of Energy (Study on Adaro Energy Tbk, LQ45)," International Journal of Energy Economics and Policy, Econjournals, vol. 8(3), pages 131-140.
    29. Toto Gunarto & Rialdi Azhar & Novita Tresiana & Supriyanto Supriyanto & Ayi Ahadiat, 2020. "Accurate Estimated Model of Volatility Crude Oil Price," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 228-233.
    30. Raghid Farhat & Nesreen K. Ghaddar & Kamel Ghali, 2014. "Investing in PV Systems utilizing Savings from Building Envelop Replacement by Sustainable Local Material: A Case Study in Lebanese Inland Region," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 554-567.
    31. Rafal Weron, 2006. "Modeling and Forecasting Electricity Loads and Prices: A Statistical Approach," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0601.
    32. Robert Engle, 2001. "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 157-168, Fall.
    33. Azimli, Asil, 2020. "The impact of COVID-19 on the degree of dependence and structure of risk-return relationship: A quantile regression approach," Finance Research Letters, Elsevier, vol. 36(C).
    34. Rafal Weron & Adam Misiorek, 2006. "Short-term electricity price forecasting with time series models: A review and evaluation," HSC Research Reports HSC/06/01, Hugo Steinhaus Center, Wroclaw University of Technology.
    35. repec:eco:journ2:2017-04-12 is not listed on IDEAS
    36. Chen, Shi & Yang, Yang & Lin, Jyh-Horng, 2020. "Capped borrower credit risk and insurer hedging during the COVID-19 outbreak," Finance Research Letters, Elsevier, vol. 36(C).
    37. Adedoyin Ramat Ayinde & Bilal Celik & Jelilov Gylych, 2019. "Effect of Economic Growth, Industrialization, and Urbanization on Energy Consumption in Nigeria: A Vector Error Correction Model Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 9(5), pages 409-418.
    38. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Supriyanto, 2022. "The Effect of Investment Risk, Macroeconomics on Stock Prices in IPO Companies during the Covid-19 Pandemic," GATR Journals afr209, Global Academy of Training and Research (GATR) Enterprise.
    2. Supriyanto Supriyanto & Suripto Suripto & Arif Sugiono & Putri Irmala Sari, 2021. "Impact of Oil Prices and Stock Returns: Evidence of Oil and Gas Mining Companies in Indonesia during the COVID-19 Period," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 312-318.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Iyer, Subramanian Rama & Simkins, Betty J., 2022. "COVID-19 and the Economy: Summary of research and future directions," Finance Research Letters, Elsevier, vol. 47(PB).
    2. Supriyanto Supriyanto & Suripto Suripto & Arif Sugiono & Putri Irmala Sari, 2021. "Impact of Oil Prices and Stock Returns: Evidence of Oil and Gas Mining Companies in Indonesia during the COVID-19 Period," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 312-318.
    3. Naidu, Dharmendra & Ranjeeni, Kumari, 2021. "Effect of coronavirus fear on the performance of Australian stock returns: Evidence from an event study," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    4. Weron, Rafał, 2014. "Electricity price forecasting: A review of the state-of-the-art with a look into the future," International Journal of Forecasting, Elsevier, vol. 30(4), pages 1030-1081.
    5. Erica Virginia & Josep Ginting & Faiz A.M. Elfaki, 2018. "Application of GARCH Model to Forecast Data and Volatility of Share Price of Energy (Study on Adaro Energy Tbk, LQ45)," International Journal of Energy Economics and Policy, Econjournals, vol. 8(3), pages 131-140.
    6. Serinaldi, Francesco, 2011. "Distributional modeling and short-term forecasting of electricity prices by Generalized Additive Models for Location, Scale and Shape," Energy Economics, Elsevier, vol. 33(6), pages 1216-1226.
    7. Curtis Nybo, 2021. "Sector Volatility Prediction Performance Using GARCH Models and Artificial Neural Networks," Papers 2110.09489, arXiv.org.
    8. Runumi Das & Arabinda Debnath, 2022. "Analyzing the COVID-19 Pandemic Volatility Spillover Influence on the Collaboration of Foreign and Indian Stock Markets," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 14(2), pages 411-452, June.
    9. Rama K. Malladi & Prakash L. Dheeriya, 2021. "Time series analysis of Cryptocurrency returns and volatilities," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(1), pages 75-94, January.
    10. Lo Prete, Chiara & Norman, Catherine S., 2013. "Rockets and feathers in power futures markets? Evidence from the second phase of the EU ETS," Energy Economics, Elsevier, vol. 36(C), pages 312-321.
    11. Rialdi Azhar & Fajrin Satria Dwi Kesumah & Ambya Ambya & Febryan Kusuma Wisnu & Edwin Russel, 2020. "Application of Short-term Forecasting Models for Energy Entity Stock Price (Study on Indika Energi Tbk, JII)," International Journal of Energy Economics and Policy, Econjournals, vol. 10(1), pages 294-301.
    12. Nairobi Nairobi & Edwin Russel & Ambya Ambya & Arif Darmawan & Mustofa Usman & Wamiliana Wamiliana, 2020. "Dynamic Modeling Data Export Oil and Gas and Non-Oil and Gas by ARMA(2,1)-GARCH(1,1) Model: Study of Indonesian s Export over the Years 2008-2019," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 175-184.
    13. Cervantes, Paula & Díaz, Antonio & Esparcia, Carlos & Huélamo, Diego, 2022. "The impact of COVID-19 induced panic on stock market returns: A two-year experience," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 1075-1097.
    14. Ly, Kim Tien, 2021. "A COVID-19 forecasting system using adaptive neuro-fuzzy inference," Finance Research Letters, Elsevier, vol. 41(C).
    15. Siddiqi, Hammad, 2007. "Rational Interacting Agents and Volatility Clustering: A New Approach," MPRA Paper 2984, University Library of Munich, Germany.
    16. Lars Stentoft, 2008. "American Option Pricing Using GARCH Models and the Normal Inverse Gaussian Distribution," Journal of Financial Econometrics, Oxford University Press, vol. 6(4), pages 540-582, Fall.
    17. Allen, David E. & Amram, Ron & McAleer, Michael, 2013. "Volatility spillovers from the Chinese stock market to economic neighbours," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 94(C), pages 238-257.
    18. Shehu Usman Rano, Aliyu, 2010. "Does inflation has an Impact on Stock Returns and Volatility? Evidence from Nigeria and Ghana," MPRA Paper 30091, University Library of Munich, Germany, revised 19 Mar 2011.
    19. Ñíguez, Trino-Manuel & Perote, Javier, 2017. "Moments expansion densities for quantifying financial risk," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 53-69.
    20. Misiorek Adam & Trueck Stefan & Weron Rafal, 2006. "Point and Interval Forecasting of Spot Electricity Prices: Linear vs. Non-Linear Time Series Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 10(3), pages 1-36, September.

    More about this item

    Keywords

    Stock Price; Heteroscedasticity; GARCH Model; Event Window;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ2:2021-03-19. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.