Analysis of the Influence of Winner-Loser Portfolio and Optimal Portfolio on Prior Capital Market Performance and during the Covid-19 Pandemic

Abstract

This research aims to test the overreaction anomaly of winner portfolios and loser portfolios on capital market performance before and during the COVID-19 pandemic and test the influence of winner portfolios, loser portfolios and optimal portfolios on capital market performance as well as including ROE, DER, inflation, exchange rates and interest rates as control variables. The first stage of testing uses the event study method. The second stage of the model uses panel data regression. The data used were 26 LQ45 companies on the Indonesia Stock Exchange from September 2019 – August 2020. The results of this research found that in the first stage no overreaction anomaly was found. The second stage in the panel data regression is that the dependent variable has a positive effect on the winner portfolio, the loser portfolio has a negative effect and the optimal portfolio has no effect. ROE in the winner, loser and optimal models has a positive effect, DER has a positive effect in the winner group, while in the loser group there is no effect, in the optimal group DER has a negative effect. Inflation has a positive effect in the winner, loser and optimal groups. The exchange rate has no effect in the winner and loser groups, while in the optimal group the exchange rate has a negative effect. Interest rates have a positive effect on capital market performance. This research only examines events before and during the COVID-19 pandemic, for next research period can be extended and samples does not group companies into groups of large asset companies and small asset companies. This research provides an overview and is useful in decision making for investors and managers. This research model tries to complement financial ratios with several micro and macro variables that have an influence on capital market performance before and during the COVID-19 pandemic.