Research Paper
Year: 2020 | Month: March | Volume: 7 | Issue: 3 | Pages: 463-472
Analysis of LQ45 Stock Market Index Reaction on Presidential Election 2019
Debby Nadia Putri, Isfenti Sadalia, Nisrul Irawati
Master of Management Study Program, Postgraduate School of University of Sumatera Utara, Indonesia
Corresponding Author: Debby Nadia Putri
ABSTRACT
The capital market is one of the economic supports for a country. In recent years, the Indonesian capital market has developed quite rapidly, this indicates that investment passion is developing quite well. It is undeniable that the capital market is used as an indicator and supporting the progress of a nation's economy. The capital market reacts to events that have information content, both economic events and or non-economic events. Political events are closely related to the stability and economic performance of a country. In Indonesia, capital market reactions seem to be inseparable from the reactions that occur in the capital market. This research tries to analyze the capital market reaction to political events in Indonesia, in this case, the Presidential Election2019 which is divided into 2 research periods, namely when the Election is held and the Election Results Announcement. Capital market reaction is measured by analyzing abnormal returns and trading volume of stock activity. Market reaction testing uses event study analysis techniques and sampling is conducted by purposive random sampling method of LQ 45 shares on the Indonesia Stock Exchange (IDX) during the observation period. Abnormal returns are calculated based on expected returns obtained using the Single Index Market Model (SIMM). The results showed a significant abnormal return that occurred around the Election2019. Furthermore, Testing on the differences of abnormal return showed no significant differences before and after the election but had a significant difference before and after the Announcement of Election Results. Testing from stock trading volume activity showed that there are differences in TVA at the time of the General Election and there are no differences in stock trading volume at the time of Election Results Announcement.
Keywords: Capital Market Reaction, Event Study, Abnormal Return, Trading Volume Activity
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