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

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Kirana, Nadhifah (2019) The Effect of Political Event on Indonesian Stock Market: An Event Study of The Presidential Election on LQ45 Index Stocks. Undergraduate thesis, Sekolah Tinggi Manajemen IPMI.

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Abstract

A political event –presidential election has always been an attractive event for both domestic and foreign investors, as one of the event that bring 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 presidential election in Indonesia have any effect on the stock performance on Indonesia Stock Exchange (IDX). The variables used in the analysis include abnormal return and trading volume activity, of 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 differences in average abnormal return before and after most of the events. This result is contradictive with the other variable, as there are differences in 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 not to worry on making investment decision ahead of the presidential election period. Keywords: Political Event, Presidential Election, Stock Performance, Abnormal Return, Trading Volume Activity

Item Type: Thesis (Undergraduate)
Subjects: H Social Sciences > HC Economic History and Conditions
Divisions: Thesis > Bachelor of Business Administration
Depositing User: Hasna Salsabila
Date Deposited: 16 Jan 2020 09:28
Last Modified: 17 Jan 2020 03:20
URI: http://repository.ipmi.ac.id/id/eprint/273

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