The Influence of a Political Event on Property Sector Stocks in Indonesia Stock Exchange

Main Article Content

Riska Rosdiana

Abstract

This study examines the capital market reaction from the declaration of the presidential and vice presidential candidates for the 2018 presidential election, which will be marked by the presence or absence of abnormal returns. The samples used are stocks that are incorporated into the property sector. As a study of events, this research observes the reaction before, during, and after the event within the observation period. The periods of research used were H-3 (before the event), H0 (current events), and H + 3 (after the event). The data are obtained from www.idx.co.id. The data used in this research is secondary data, such as the stock closing price, which has been adjusted (the closing price is adjusted), and the closing price of IDX. The data are in the form of daily stock prices. These data are then analyzed using the analytical method of the paired sample t-test. The results showed that Abnormal Return had no significance. This means that there is no market reaction when there is an excess of actual return compared to a normal return in the stock exchange of the property. The significance level has a negative condition exactly three days before the declaration of presidential and vice-presidential candidates, which is dated August 6th, 2018. However, in the following days, the 7th and 8th of August 2018, it has experienced an insignificant level of positive. This means that the market perceived appropriately before the presidential and vice-presidential candidates were set. In addition, the statistics test result of the Average Trading Volume Activity (TVA) proved that there was a significant difference between the period before and after the official registration of the presidential and vice-presidential candidates in the General Election Commission (KPU). The results showed that there were significant differences due to the value of sig. greater than 0.05 or 0.006 ≥ 0.05.

Keywords:
Capital market, property index, event study, abnormal return

Article Details

How to Cite
Rosdiana, R. (2020). The Influence of a Political Event on Property Sector Stocks in Indonesia Stock Exchange. Asian Journal of Economics, Business and Accounting, 17(1), 32-45. https://doi.org/10.9734/ajeba/2020/v17i130252
Section
Original Research Article

References

Osuala, Onoh UA, et al. Presidential election results and stock market performance: Evidence from Nigeria. Applied Economics and Finance; 2018.

Fama, Eugene F, et al. The adjustments of stock prices to new information. International Economic Review. 1969;10(1):1-21.

Mulyana A, Iskandar D. Tendency to present political issues in kompas daily news after president Jokowi's inauguration for December 2014 Period; 2015.

Santoso; 2007

Keane S. The efficient capital market hypothesis on trial. Financial Analyst Journal. 1986;19-34.

Opong KK, Mulholland G, Fox AF, Farahmand K. The behaviour of some UK equity indices: An application of Hurst and BDS tests. Journal of Empirical Finance. 1999;6(3):267-282.

Ramesh S, Rajumesh. Stock market reaction to political events: A study of listed companies in Colombo stock exchange of Sri Lanka. Journal of Economics and Sustainable Development. 2015;6(3):131-140.

Imelda Hermanto Siregar, Lukytawati Anggraeni. Abnormal returns and trading volumes in the Indonesian stock market in relation to the presidential elections in 2004, 2009, and 2014. International Journal of Administrative Science & Organization. 2014;21(2):65-76. Bogor: Bogor Agricultural University.

Sirait, et al. The impact of the change of the Indonesian minister of finance in 2010 on abnormal return of banking companies listed on the Indonesia stock exchange. E-Journal of Twinkle Accounting. 2012;1(1).

Khan S, Baig N, Usman M, Shaique M, Shaikh R. Stock market dynamics in Pakistan: What do political events and budget announcements disclose? Research Journal of Finance and Accounting. 2017;8(10).

Forsythe Frank, Krishnamurthy Ross. Markets as predictor of election outcomes: campaign events and judgement bias in the 1993 UBC election stock market. Canadian Public Policy – Analyse de Politiques. 1998;XXIV(3).

Huber Jurgen, Kirchler Michael. Corporate campaign contributions and abnormal stock return after presidential election. Public Choice. 2013;156:285-307.

Trisnawati Fenny. Pengaruh peristiwa politik terhadap perubahan harga saham. Pekbis Jurnal. 2011;3(3):528-535.

Sartono Agus. Financial management theories and applications. Third Edition. BPFE. Yogyakarta; 1999.

Husnan Suad. Portfolio theory and securities analysis. YKPN STIM UPP. Yogyakarta; 2009.

Hartono Jogiyanto. Portfolio theory and investment analysis. Eighth Edition. Yogyakarta; 2013.

MacKinlay. Journal of Economic Literature. 1997;35:1.

Sukirno DS. Event study an approach in accounting research. Journal of Information. 2003;XXXI(1):102-115.

Suryawijaya Marwan Asri, Faisal Arief Setiawan. Indonesian Capital Market Reactions to Domestic Political Events (Event Study on 27 July 1996). Manage No. 1998;18:137-153.

Ang Robert. The smart book of the Indonesian capital market (The Intelligent Guide to Indonesian Capital Market). Jakarta; 1997.

Sukmaningrum, Madyan, Hendratmi. Stock market reaction registered in the Jakarta Islamic index (JII) against the announcement of the establishment of the DKI Jakarta Governor in 2017. Journal of Islamic Economics and Business. 2019;5(1).

Rofiki, Topowijono, Nurlaily. Indonesian capital market reaction as a result of the second round of 2017 DKI Jakarta Governor Election (Event Study of Company Shares Listed in Lq45 Index Period February - July 2017). Journal of Business Administration (JAB). 2018;62(2).

Katti Siti Wardhani. Influence of political events (Presidential Election and Announcement of Cabinet Arrangements) on industrial sector shares in the Indonesia Stock Exchange. Capital. 2018;1(2).

Dewi, Wahyuni, Dianita. The effect of the 2017 Dki Governor Election on abnormal returns and trading volume of lq45 shares on the IDX. E-Journal of Ganesha University of Accounting Education. 2017;8(2).

Alrhafynza Siswanto. Indonesian capital market reaction against national political events (Study on LQ-45 shares on the judgment of the blasphemy case by the governor of DKI Jakarta, Basuki Tjahaya Purnama 2017. The 3rd National Seminar on Management and Business Management Study Program Faculty of Economics and Business, Jember University, 2018.

Rahmawati Pandansari. Capital market reaction from the impact of the Sarinah plaza bombing against the abnormal return of lq-45 companies registered on the IDX. Indonesian Accounting and Financial Research; 2016.

Sudewa, Sari. Market reaction to the events of the 2014 presidential election. Udayana University Accounting Journal; 2015.

Lamasigi, et al. Capital Market reaction to the events of the replacement of the president of the Republic of Indonesia July 23, 2001: Study of LQ-45 Stock Returns at PT. Jakarta Stock Exchange. Accounting V National Symposium Semarang; 2002.

Nurhaeni N. Impact of 2009 Indonesian legislative elections on abnormal returns and stock trading volume activities on the Indonesia stock exchange; 2009.

Nurita Dea. Event study: Announcement of 2014 legislative election quick count. Article Not Published; 2014.

Primary et al. Indonesian capital market reaction against political events (event study on Jokowi's inauguration as the 7th president of the Republic of Indonesia). EJurnal Ganesha University of Education. 2015;3(1).

Bechtel MM. The political sources of systematic investment risk: Lessons from a consensus democracy. The Journal of Politics. 2009;71(2):661-677.

Pantzalis C, Stangeland D, Turtle H. Political elections and the resolution of uncertainty: The international evidence. Journal of Banking and Finance. 2000;24(10):1575-1604.

Hsu C, Yu W. A study on the relationship between election and Taiwan stock market. Journal of Far East University. 2005;22(2):231-249.

Yi-Hsien, Mei-Yu, Che-Yang. Retraction notice to “New hybrid methodology for stock volatility prediction” Expert Syst. 2008;36(2P1):1833–1839].

Onder Mugan. How do political and economic news affect emerging markets? Evidence from Argentina and Turkey. Emerging Markets Finance and Trade. 2006;42(4):50-77.

Chen DH, Binand FS, Chen CD. Investigated the possible impact of various political events on Taiwan’s stock performance. International Journal of Business. 2005;10(2).

Kothari Sriprakash, Jerold Warner. Econometrics of event studies. In Handbook of Corporate Finance—Empirical Corporate Finance. Edited by B. Espen Eckbo. Amsterdam: Elsevier. 2007;1.

Sugiyono. Business research methods. Bandung: CV Alfabeta; 2012.

Foster George. Financial statement analysis. Second Edition. Singapore: Prentice; 1986.

Elton Gruber. Modern portfolio: Theory and investment analysis. New York: Wiley. 2005;5.

Anggraini Diany A. The impact of Indonesia's 2009 legislative elections on abnormal returns and stock trading volume activities on the idx (study test on shares registered in the LQ-45 group of companies); 2012.

Pamungkas Aryo. The influence of the 2014 Indonesian presidential election on abnormal return and trading volume acuity (study of companies listed as kompas100 index members). Malang: Brawijaya University; 2015.

Mari'a Hilda, ‘Asla. Indonesian capital market reactions to the 2015 asean economic community (aec) events (study of manufacturing companies listed on the Indonesia stock Exchange). Malang: Brawijaya University; 2016.

Syaputra Kamilia. Stock market reactions in several asean stock exchanges on Britain to exit (Brexit) events in Europe (study on Indonesia, Malaysia, Singapore, Philippines and Thailand stock indexes). Undergraduate Thesis, Faculty of Economics and Business, University of Lampung (UNILA), Lampung; 2016.

Fanni Christian Martha. Capital market reaction against Jakarta flood disasters in 2013 (Event study on insurance company shares listing on the IDX). Malang: Brawijaya University; 2013.

Aini Niswah Qurrotul. Abnormal return and trading volume activity as a measure of capital market reaction (case study on the strengthening of the highest us dollar against Rupiah in 2015 on LQ-45 Shares). Malang: Brawijaya University; 2015.

Effendi Mahmud. The impact of changes in lot size policy and tick size policy on fluctuations in the reaction of capital market investors on the Indonesia stock exchange. Malang: Brawijaya University; 2015.

Maria Qifthiyah Alkaff. The effect of the 2009 RI presidential election on share prices and trading volume of company shares on the Indonesia stock exchange (Event Study on JII Member Shares). Thesis, Accounting Department, Faculty of Economics, University of East Java National Veterans Development; 2010.