Short-Term Overreaction of Islamic Stocks to Specific Events in Indonesia

Mujadiddah, Sofina; Achsani, Noer Azam; Irfany, Mohammad Iqbal

doi:10.21098/jimf.v6i1.1121

Cited by 7 publications

(33 citation statements)

References 11 publications

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“…Seven specific events are followed by price reversal and return reversal (De Bondt & Thaler, 1985). The determination of the observation period in the research is based on research by Mujadiddah et al (2020) and Boubaker et al (2015). The period used for adjustments to determine the reaction of the Islamic stock market consists of three periods: 1) the estimation period, 2) the event period and 3) the test period.…”

Section: Methodsmentioning

confidence: 99%

“…Cumulative abnormal return is the sum of the abnormal return of a stock during the estimated research period. The research accumulates abnormal returns into two periods: 1) before the event occurs to determine the category of the stock portfolio and 2) after the event occurs to examine the effect of the overreaction phenomenon (Mujadiddah et al, 2020). The highest CAR value will be the winner stock category and the lowest will be the loser stock category.…”

Section: Methodsmentioning

confidence: 99%

“…Fatima, Rashid and Khan (2019) also find that Islamic stock returns show a significant reaction to negative events. Furthermore, Islamic stock inefficiency is also discovered by Mujadiddah et al (2020) who conduct research on the short-term overreaction phenomenon to certain events in stocks listed on JII. The results of these studies indicate that the bombing incident in Surabaya results in excessive stock reactions.…”

Section: Introductionmentioning

confidence: 99%

“…The decline in stock prices and the high volatility that occurs in the Islamic stock market can cause an overreaction phenomenon. Overreaction appears due to fraudulent information that causes misleading information and tends to be a tadlis violation (transparency of information and prohibition of misleading information) (Mujadiddah, Achsani & Irfany, 2020). Sharia stocks are the ones whose operations are regulated in accordance with the sharia principles.…”

Section: Introductionmentioning

confidence: 99%

“…Sharia stocks are the ones whose operations are regulated in accordance with the sharia principles. Sharia stock operational arrangements are listed in the Fatwa DSN MUI Number 80 of 2011 which explains that the prohibition of behavior containing elements of maisir, dharar, usury, immorality and tyranny, gharar, ghabn, risywah, talaqqi al-rukban, tadlis, tanajusy/najsy, ghisysy, bai 'al-ma' dum, taghir, and iktikhar. The implication of this prohibition regarding these elements prevents the practice of insider trading, misleading information, and front running (Mujadiddah et al, 2020). The implementation of sharia principles should be able to make the Islamic stock market more efficient than the common stock market (Yan, 2020).…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

The Outbreak of COVID-19 and Islamic Stock Market Responses in Indonesia

Permata¹,

Purwanto²,

Ermawati³

2021

The Winners

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The research intended to analyze the overreaction phenomenon in Islamic stocks due to COVID-19 as well as the influencing factors by utilizing different test methods and cross-sectional regression. The research employed data on the daily stock prices from August 9th, 2019 to October 26th, 2020 on the Jakarta Islamic Index (JII) and the stocks utilized during the period of events. The sample of this research utilized seven events related to COVID-19. The findings of this research reveals that the announcement of COVID-19 transmission and lockdown (Event 2) causes overreaction in winner stocks. Meanwhile, the overreaction phenomenon of loser stock is due to the announcement of the United States fiscal stimulus (Event 5) and the announcement of the PSBB (Event 6). Furthermore, the new normal announcement event (Event 7) triggers overreaction in the winner and loser stocks. The results indicate that Islamic stocks continue to have several transactions which are prohibited by the Fatwa DSN MUI in the short term. In this case, the variables that impact the overreaction phenomenon are shown to be substantially and negatively linked to leverage and market capitalization, while trading volume significantly influences and has a positive correlation with the overreaction phenomenon.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

The Outbreak of COVID-19 and Islamic Stock Market Responses in Indonesia

Permata¹,

Purwanto²,

Ermawati³

2021

The Winners

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Price-limit effectiveness: evidence from the Borsa Istanbul (BIST)

Aktas

Kryzanowski

Jie

2021

IMEFM

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Purpose This paper aims to analyze the impact of price-limit hits by hit type and when such hits start and stop using intraday trades and quotes at a one-second frequency for firms included in the BIST-50 index during the 13-months starting with March 2008. Like the recent COVID-19 period, this period includes the heightened stress in global financial markets in September 2008. Design/methodology/approach Using intra-day trades and quotes at a one-second frequency, the authors examine the market effects of price limits for firms included in the BIST-50 index during the global financial crisis. The authors compare the values of various metrics for 60 min centered on price-limit hit periods. The authors conduct robustness tests using auto regressive integrated moving average (ARIMA) models with trade-by-trade and with 3-min returns. Findings The findings are supportive of the following hypotheses: magnet price effects, greater informational asymmetric effects of market quality and each version of price discovery. Results are robust using samples differentiated by cross-listed status, same-day quotes instead of transaction prices and equidistant and trade-by-trade returns. Originality/value The authors use intraday data to reduce measurement error that is particularly pronounced when daily data are used to assess price limits that start and/or stop during a trading session. The authors contribute to the micro-structure literature by using ARIMA models with trade-by-trade and 3-min returns to alleviate some bias due to the autocorrelations in returns around price-limit hits in the presence of a magnet effect. The authors include some recent regulation changes in various countries to illustrate the importance of circuit breakers using price limits during COVID-19.

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Investigating beta anomaly: comparison of Shariah-compliant and conventional stocks

Qamar

Hassan

Nazir

et al. 2021

IMEFM

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Purpose The purpose of this paper is to examine the impact of dividend announcements on the stock return of Shariah-compliant and conventional stocks. Design/methodology/approach An event study methodology is applied to study the beta anomaly. Market-adjusted return model, mean-adjusted return model and market model have been applied to calculate excess returns. Estimation period used in this study is 130 days, and event period consists of 21 days in total, i.e. starting from the day –10 “before the cash dividend announcement” to day +10 “after the cash dividend announcements. Findings It has been concluded from the results that dividend plays an informational role in the Pakistan Stock Exchange. As the investors in Pakistan react favorably to the dividend increase announcements and unfavorably to the dividend decrease announcements, they consider dividend increase announcement as good news and dividend decrease announcement as bad news. Practical implications The findings of this study have several implications for different participants of the stock market, such as investors, academicians, researchers, fund managers and policymakers. They can use this information to make decisions while making efficient portfolios. Investors may get abnormal returns by focusing on the dividend announcement patterns. This can influence the attitude of investors toward efficient investments in the stock market and ultimately contribute to the betterment of society. This study is also beneficial for academicians and researchers, as it provides a comparative analysis of Shariah-compliant and conventional stocks and the anomalous effect of dividend announcements on stock return. Originality/value Limited research in the world’s context and null is available in Pakistani context on the subject matter. The comparative analysis of “Shariah-compliant” and “conventional” stocks provides insight into the asset pricing of Shariah-compliant stocks that have not been explored earlier. This study also uses three different methods (mean model, market model and market-adjusted return models) to compare Shariah-compliant and conventional stocks

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Short-Term Overreaction of Islamic Stocks to Specific Events in Indonesia

Cited by 7 publications

References 11 publications

The Outbreak of COVID-19 and Islamic Stock Market Responses in Indonesia

The Outbreak of COVID-19 and Islamic Stock Market Responses in Indonesia

Price-limit effectiveness: evidence from the Borsa Istanbul (BIST)

Investigating beta anomaly: comparison of Shariah-compliant and conventional stocks

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