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

Muhammad Hasan Ghazali and Taufik Faturohman

A chapter in Quantitative Analysis of Social and Financial Market Development, 2022, vol. 30, pp 47-60 from Emerald Group Publishing Limited

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.

Keywords: Jakarta Composite Index; COVID-19; efficient market hypothesis; event study; abnormal return; capital market; G14; M20; N15 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:isetez:s1571-038620220000030004

DOI: 10.1108/S1571-038620220000030004

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