COVID-19 EFFECTS ON THE MUTUAL FUND INDUSTRY IN INDONESIA

• Main Author: Yulianti
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/57324
• Institution: Institut Teknologi Bandung

The covid-19 pandemic not only created a health crisis but also triggered the financial and economic crisis. The outbreak of COVID–19 has shaken the global financial markets, including in Indonesia. This paper aims to analyze the mutual fund relationship with the stock market and exchange rate during pre-crisis and crisis conditions. This study also identifies whether there is an interdependence or contagion effect on the mutual fund industry in Indonesia. The period of the study is January 2016 until January 2021. We implement the Chow test to identify whether the Covid-19 pandemic that triggered the financial crisis cause a structural break in Indonesian Mutual Fund data. After that, we conduct Vector Auto Regression to analyze and create a model before and during the Covid-19 crisis. The Granger Causality test is conducted to identify the relationship between Mutual Fund Indexes return in Indonesia and Global and Local Stock Market return and the exchange rate. Moreover, we investigate the impulse response of shocks from the independent variables to Mutual Fund Indexes Return. The results show that global market return granger cause Mutual fund indexes in Indonesia before and during the crisis, except for the return of Sharia Money Market Index. Overall, before the COVID-19 crisis, a shock into the S&P500 index generates a short-term impact on Mutual Fund Indexes in Indonesia, while during the crisis, this impact becomes more prominent and more prolonged. This shock also generates a significant change in the mutual fund models’ prediction in Indonesia. We also find significant increases in the coefficient correlation between mutual fund Indexes returns and the S&P500 index during the crisis period, indicating a contagion impact on Mutual Fund Industry in Indonesia. This research is the first study that analyses the Covid-19 impact on the mutual fund industry in Indonesia. The result of this study is expected to give input to the policymaker to creates a policy to prevent the worse impact to the economy and to the investor to consider diversification strategies related to international investments.