THE IMPACT OF COVID-19 RELATED EVENTS TO INDONESIAN COMPOSITE AND SECTORAL INDICES

• Main Author: Hasan Ghazali, Muhammad
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/56842
• Institution: Institut Teknologi Bandung

The Indonesian capital market experienced a decline to 5,311 when the first COVID-19 cases were discovered. Therefore, this study aims to determine whether the Indonesian capital market, seen from the composite and nine sectoral indexes, has significantly affected the occurrence of several COVID-19 events. This study examines two forms of market efficiency hypothesis in the Indonesian capital market: weakform and semi-strong form efficiency. Weak form efficiency will be tested using run tests and variance ratios for March 2, 2016, to March 2, 2021. This method is cumulative abnormal returnried out to identify the form of market price movements. If prices are formed following a random walk pattern, the Indonesian capital market is efficient in a weak form condition. If a weak form efficiency has been found in a capital market, further research related to semi-strong form efficiency can be cumulative abnormal returnried out. Semi-strong efficiency can be analyzed through event studies to determine whether the stock price or index is formed due to reactions obtained from information. This reaction can be seen from the abnormal return value, and the significance test of each index studied. If the abnormal return value is significant, then the stock or index is efficient in a semi-strong condition. The event study research was cumulative abnormal returnried out by looking at six incidents related to COVID-19 in Indonesia, such as 1) Establishment of a call center for the spread of the virus in Jakarta (23 January 2020), 2) The official WHO announcement regarding COVID-19 becoming an international emergency case (20 January 2020), 3) The discovery of the first COVID-19 case in Indonesia (2 March 2020), 4) Implementation of the first PSBB policy (6 April 2020), 5) Acceptance of the Sinovac vaccine to Indonesia (7 December 2020), and 6) Implementation of mass vaccination in Indonesia ( January 13, 2021). This research shows that the price owned by the composite index moves following the random walk model pattern. Therefore, investors will find it very difficult to predict future prices by using past prices. Thus, the Indonesian capital market can be concluded efficiently in the form of a weak condition. In the event study testing for the composite index, there was a significant negative cumulative abnormal return when discovering the first COVID-19 case in Indonesia. In implementing the first PSBB policy, a significant cumulative abnormal positive was found on the composite index. From the sectoral view, there are several different reactions from each index due to the occurrence of events related to COVID-19 in Indonesia. In the information associated with establishing a call center in Jakarta, there was not a single significant cumulative abnormal return in the nine sectoral indexes studied.