THE IMPACT OF THE RUSSIAN-UKRAINE WAR-RELATED EVENTS ON THE INDONESIAN CAPITAL MARKET

• Main Author: Vieriawan, Peter
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/73528
• Institution: Institut Teknologi Bandung

This study examines the impact of Russia-Ukraine war-related events on the Indonesian capital market, with a specific focus on the composite index ‘JKSE’ and the energy and transportation sectors represented by IDXENERGY and IDXTRANS. The objective is to assess market efficiency based on Eugene Fama’s efficient market hypothesis. The research utilizes a two- stage approach. Firstly, the weak form of market efficiency is evaluated through a unit root test to determine if the indexes follow a random walk pattern. The results indicate that all three indexes (IDXENERGY, IDXTRANS, and JKSE) exhibit a random walk pattern, suggesting weak form efficiency. Moving to the second stage, the semi-strong form of market efficiency is assessed using Ball and Brown’s standard event study method. Four events related to the war are selected: the announcement of the war, Russia’s gas export cut to the Europe union (both half and full), and the destruction of the Crimea Bridge. Event windows of 1-, 5-, 10-, and 20- day are examined. The Findings reveal that IDXTRANS demonstrates significant abnormal returns across all events, indicating a semi-strong form efficient market. JKSE also exhibits significance around the Crimea Bridge destruction event, further supporting the notion of semi-strong form efficiency. However, IDXENERGY does not demonstrate significant abnormal returns during the examined events, suggesting weak form efficiency only. Although not all abnormal returns are statistically significant, the research highlights that the market exhibits reactions to the events, indicating some level of sensitivity. These findings contribute to our understanding of the Indonesian capital market’s response to geopolitical events and shed light on its market efficiency characteristics. In conclusion, the study shows that IDXTRANS and JKSE exhibit signs of being semi-strong form efficient markets, while IDXENERGY remains in the weak form. Further research is recommended to include trading volume activity as another research variable to get a better research perspective. Not only that, adding other sectoral indexes and changing the expected result method may also be of help to improve future research.