The Effect of Political Event on the Indonesian Stock Market: An Event Study of Presidential Election on LQ45 Index Stocks

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Kirana, Nadhifah and Sembel, Roy (2019) The Effect of Political Event on the Indonesian Stock Market: An Event Study of Presidential Election on LQ45 Index Stocks. International Journal of Business, Economics and Law, 19 (1). pp. 40-49. ISSN 2289-1552

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Abstract

A political event has always been an attractive event for both domestic and foreign investors since it brings a significant impact to the country’s stability and is to determine a new direction of the government for the following period. This research analyzes whether the Indonesian presidential election has an effect on the stock performance on Indonesia Stock Exchange. The variables used in the analysis include abnormal return and trading volume activity, which are collected from the IDX and annual reports. This research uses the event study approach, and includes all the direct presidential elections in Indonesia. The hypothesis testing includes non parametric tests of One-Sample Wilcoxon Signed Ranks and Two-Sample Wilcoxon Signed Ranks, with a 10-day event period before and after the event. The sample data is taken using the purposive sampling method from all public companies listed in IDX, of which resulted to the ones included in LQ45 Index during the event period. The findings identify that there are no abnormal returns around the presidential election period; this research also finds that there are no actual differences in the average abnormal return before and after most of the events. As of the trading volume, there are differences in the average trading volume activity before and after most of the events. Based on the findings, this research recommends investors to focus on the economic information, and take into account the trading volume around the period in deciding on investing in stock market around the presidential election. Keywords: Political event, presidential election, stock performance, abnormal return, trading volume activity.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HG Finance
J Political Science > JS Local government Municipal government
Divisions: Research And Community Empowerment > Journals
Depositing User: Rizky Amalia
Date Deposited: 27 Jan 2020 04:42
Last Modified: 19 Feb 2021 05:19
URI: http://repository.ipmi.ac.id/id/eprint/633

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