LQ45 Stock Index Abnormal Return Reaction to the Covid-19 Pandemic: the Even Study Methodology

Abstract

LQ45 Index stocks are liquid stocks with high market capitalization, have a high trading frequency, growth prospects, and fairly good financial conditions, are not volatile and have been objectively selected by the IDX. This research aims to determine the abnormal return of LQ45 Stock Index to the covid-19 pandemic. This research uses even study method with population consisted entirely of daily data from the ten most populous cities in the United States. The result of this study shows that there are significant differences in abnormal returns before and after the announcement of the Covid-19 pandemic by WHO. The announcement of this pandemic is responded to as a negative signal by investors so that information regarding the announcement of the Covid-19 pandemic by the WHO is responded to early and at the time of launching the information no longer had any effect because the prices had moved towards equilibrium. The future research that extend the research time period and include other external factors such as lockdown policies or inflation is needed as the limitation in this research.

The impact of cases and death reports of COVID-19 on prices and returns

“…Otherwise, Irvan and Suhendah (2022) find that the increase in the number of cases and the number of recoveries from COVID-19 had a significant impact on the stock return of the consumer goods sector for the period March 2 to June 4, 2020. Moreover, Sari (2022) also finds that stock prices and abnormal returns are decreasing after March 11, 2020, the same as that found by Solihin et al (2022)…”

Determinants of Dividend Policy on Indonesia Non-Family Companies Listed in LQ45 Index

“…The LQ45 index is an index that contains 45 companies with good fundamentals and leads to companies that have high liquidity and large market capitalization (Solihin et al, 2022). Companies in the LQ45 index come from a variety of sectors and company holdings, including non-family companies.…”