Analysis of Abnormal Return and Trading Volume Activity

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Analysis of Abnormal Return and Trading Volume Activity Difference Before and After the Announcement of New Normal

Implementation by President Joko Widodo: Study on LQ 45 in the Indonesia Stock Exchange

Shafa Aqila Muthaharia^1*, Irni Yunita¹

1 Management Business Telecommunication and Informatics, Telkom University, Bandung, Indonesia

*Corresponding Author: [email protected] Accepted: 15 February 2021 | Published: 1 March 2021

_________________________________________________________________________________________

Abstract: The COVID-19 virus pandemic affected the health sector and affected Indonesia's economic and capital markets that have fallen due to the banning of public activity. Hence, to keep the wheels of Indonesia's economy running, President Jokowi announced a new normal on May 15th. This study aims to analyze whether there is a difference between abnormal returns and trading volume activity on the announcement of the new normal implementation by President Joko Widodo with an observation period of 5 days before and five days after the information. The method used in this research is quantitative. The data used are secondary in daily closing stock prices and the number of shares traded on the LQ45 Index. The results showed no difference in abnormal returns and trading volume activity before and after the announcement of implementing the new standard policy by President Joko Widodo. The test results for each company showed no difference in abnormal returns and trading volume activity before and after the announcement. This means that the existing information is not accepted by market players quickly and accurately.

Keywords: Event Study, Abnormal Return, Trading Volume Activity, New Normal, COVID- 19

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1. Introduction

Currently, investments can be made by the community to increase the income they have.

According to Wahyuni et al. (2014), with investment, investors can increase their wealth today and in the future. A capital market is where bonds, stocks, mutual funds, and other types of securities are traded through intermediary services (Sunariyah, 2006). One of the most popular capital market products is stocks. Stocks are funds or proof of capital ownership in a company (Fahmi, 2015). Internal and external factors can influence stock price movements. One of the external factors is the announcement from the government (Brigham & Houston, 2010).

At the beginning of 2020, a new virus caused an uproar in the world, namely the emergence of a new type of coronavirus (SARS-CoV-2) whose disease name is called Coronavirus disease 2019 or COVID-19 (Yuliana, 2020). The first COVID-19 cases entered Indonesia on March 2nd, 2020. COVID-19 issues continued to increase in Indonesia until March 31st, 2020, the Covid-19 handling task force recorded 1,528 points in Indonesia (covid19.go.id, 2020). Along with the increasing number of Covid-19 cases in Indonesia and because the Covid-19 virus can be spread through close interaction, on March 31st, 2020, President Joko Widodo implemented

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Large-Scale Social Restrictions (PSBB) through Government Regulation Number 21 of 2020.

With this regulation, local governments can restrict people and goods' movement into and out of their respective areas as long as they have obtained permission from the relevant ministry (Setkab.go.id, 2020).

The limitation of people's activities affects Indonesia's economy, as evidenced by the contraction of Indonesia's Gross Domestic Product (GDP) in the second quarter of 2020 by 5.32%. With the weakening of the Indonesian economy, Indonesian President Joko Widodo, on May 15th, 2020, in a press statement regarding the new normal in Indonesia, said that people could return to their activities by requiring strict health protocols. According to the spokesman for Covid-19 Achmad Yurianto, a new standard is a new order, habits, and behavior based on adaptation to cultivate a clean and healthy lifestyle (kemkes.go.id, 2020).

The government hopes that implementing the new standard can encourage Indonesia's economy to weaken due to the COVID-19 pandemic. Investors responded positively to this announcement, as evidenced by the increase in the LQ45 Index before and after the report. On May 15th, on the announcement day, the closing price of the LQ45 Index was at Rp. 657.10.

Meanwhile, on May 19th, two days after the announcement, it increased to Rp. 671.07 and continued to rise until May 26th, reaching Rp. 689.33.

In this study, abnormal return and trading volume activity are used as indicators to determine whether there is relevance to the announcement of implementing the new normal by President Joko Widodo to the stock market. An event study is used in this research to examine the information content of an event. The capital market will react when the information received by investors contains information. The call can be said to be efficient if the prices of all traded securities reflect the ava.

2. Literature Review

An event study is a study to analyze the market response to an event where the information is published as an announcement. Event Study can be used to test the information content of a statement (Hartono, 2017). Abnormal return or excess return is the excess of actual return on standard return. The typical return is the expected return of investors (expected return). What can conclude that abnormal return is the difference between actual return and expected return (Tandelilin, 2017).

Trading volume activity is an instrument used to observe and measure the capital market's reaction to information or events that occur in the capital market (Panjaitan, 2013). Several previous studies have revealed between COVID-19 and stock prices. Research from Sambuari et al. (2020) shows that there is no significant difference in abnormal returns in the announcement of the first case of the COVID-19 virus in Indonesia in food and beverage companies listed on the Indonesia Stock Exchange, meaning that this event does not contain information that causes the market not to react.

Meanwhile, other research from Subrata & Werastuti (2020) obtained different results, namely that there is a significant difference in the average abnormal return and trading volume activity to determine the global emergency status to the highest level related to COVID-19 by WHO on the LQ45 Index.

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Research from Heyden & Heyden (2020) studied the short-term market reactions of US and European stocks during the start of the COVID-19 pandemic using an event study and found that stocks reacted significantly negatively to the announcement first death scene from abnormal returns and CAR. Furthermore, Ismanto et al. (2020), in their research, found that the average abnormal return value before and after the announcement of the DKI Jakarta PSBB Volume II was a significant difference in the LQ45 stock price with a negative mean direction.

Still, there was no significant difference in trading volume activity.

3. Methodology

They were using an event study to test the information content of the new normal's announcement by President Joko Widodo. The capital market will react if there is information content on the event. This study's population were all companies listed on the LQ45 Index for the period February - July 2020. This study's sampling technique was purposive sampling with the criteria listed on the LQ45 Index during the study period. Also, it did not carry out corporate actions during the study period. Secondary data were obtained from the website www.IDX.co.id and also www.finance.yahoo.com.

The formula of calculation to generate an abnormal return is as follows:

1) Actual Return Calculation

2) The data needed to calculate the actual return is the closing price with the formula:

3) Expected Return Calculation

The technique used in this study is a market-adjusted model. This technique assumes the expected return of a security using the market index return as the expected return itself. This model is formulated as follows

4) Abnormal Return Calculation

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To find out whether who normally distributed who carried out the data used in this study or not, the data normality test. The Kolmogorov-Smirnov test is used as a normality test tool. This study's data analysis technique was the Paired Sample T-Test and the Wilcoxon Signed Rank Test. Paired Sample T-Test was used in this study if who normally distributed the data.

However, if the data is not normally distributed, the test is carried out using the Wilcoxon Signed Rank Test.

4. Conclusion

The observation period used in this study was five days before and five days after the announcement of implementing the new normal by President Joko Widodo. Thus, the research period starts from May 8th, 2020, to May 27th, 2020 (excluding stock holidays).

The samples in this study were companies listed on the LQ45 Index for the period February - July 2020 with the criteria that companies were registered during the research period and did not take corporate actions such as stock splits, reverse stock splits, mergers and acquisitions during the research period.

Table 1: Research Sample

No. Stock Name Code No. Stock Name Code

1. Ace Hardware Indonesia Tbk.

ACES 24. Indocement Tunggal Prakarsa Tbk.

INTP 2. Adaro Energy Tbk. ADRO 25. Indo Tambangraya Megah

Tbk.

ITMG 3. AKR Corporindo Tbk. AKRA 26. Japfa Comfeed Indonesia

Tbk.

JPFA 4. Aneka Tambang Tbk. ATM 27. Jasa Marga (Persero) Tbk. JSMR 5. Astra International Tbk. ASCII 28. Kalbe Farma Tbk. KLBF 6. Bank Central Asia Tbk. BBCA 29. Matahari Department Store Tbk. PDF 7. Bank Negara Indonesia

(Persero) Tbk.

BBNI 30. Media Nusantara Citra Tbk. MNCN 8. Bank Rakyat Indonesia

(Persero) Tbk.

BBRI 31. Perusahaan Gas Negara (Persero) Tbk.

PGAS 9. Bank Tabungan Negara

(Persero) Tbk.

BBTN 32. Bukit Asam Tbk. PTBA

10. Bank Mandiri (Persero) Tbk. BMRI 33. PP (Persero) Tbk. PTPP

11. Barito Pacific Tbk. BRPT 34. Pakuwon Jati Tbk. PWON

12. Bumi Serpong Damai Tbk. BSDE 35. Surya Citra Media Tbk. SCMA 13. Bank Tabungan Pensiunan

Nasional Syariah Tbk.

BTPS 36. Semen Indonesia (Persero) Tbk. SMGR 14. Chareon Pokphand Indonesi Tbk. CPIN 37. Sri Rejeki Isman Tbk. SRIL 15. Ciputra Development Tbk. CTRA 38. Tower Bersama Infrastructure Tbk. TBIG 16. Erajaya Swasembada Tbk. ERAA 39. Pabrik Kertas Tjiwi Kimia Tbk. KIM 17. XL Axiata Tbk. EXCL 40. Telekomunikasi Indonesia (Persero)

Tbk.

TLKM 18. Gudang Garam Tbk. GGRM 41. Sarana Menara Nusantara Tbk. TOWR 19. H. M. Sampoerna Tbk. HMSP 42. United Tractors Tbk. UNTR 20. Indofood CBP Sukses Makmur

Tbk.

ICBP 43 Unilever Indonesia Tbk. UNVR 21. Vale Indonesia Tbk. INCO 44. Wijaya Karya (Persero) Tbk. WIKA 22. Indofood Sukses Makmur Tbk. PDF 45. Waskita Karya (Persero) Tbk. WSKT 23. Indah Kiat Pulp & Paper Tbk. INKP

Source: finance.yahoo.com (data processed, 2020)

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Table 2: Average Abnormal Return of LQ45 Index Shares

Before N Mean After N Mean

t-5 45 0.01215592 t+1 45 0.01114544 t-4 45 0.00755642 t+2 45 0.00253910 t-3 45 -0.00885072 t+3 45 -0.00887862 t-2 45 -0.00544285 t+4 45 0.01387299 t-1 45 -0.00321788 t+5 45 0.01332563 Table 3: Average Trading Volume Activity of LQ45 Index Shares

Before N Mean After N Mean

t-5 45 0.00263400 t+1 45 0.00215194 t-4 45 0.00323153 t+2 45 0.00256809 t-3 45 0.00264109 t+3 45 0.00158565 t-2 45 0.00224798 t+4 45 0.00272777 t-1 45 0.00246047 t+5 45 0.00335854

The result of standard testing using Kolmogorov Smirnov during research periods is as follows:

Table 4: Normality Test

One-Sample Kolmogorov-Smirnov Test Abnormal Return Before After

N 45 45

Normal Parameters^a,b Mean .00044018 .00640091 Std.

Deviation

.012746352 .016625572 Most Extreme

Differences

Absolute .077 .060

Positive .077 .048

Negative -.062 -.060

Test Statistic .077 .060

Asymp. Sig. (2-tailed) .200c,d .200c,d One-Sample Kolmogorov-Smirnov Test Trading Volume Activity Before After

N 45 45

Normal Parameters^a,b Mean .00264302 .00247840 Std.

Deviation .002980787 .002127272 Most Extreme

Differences

Absolute .228 .183

Positive .228 .183

Negative -.213 -.170

Test Statistic .228 .183

Asymp. Sig. (2-tailed) .000c .001^c

Based on data normality testing results, the average abnormal return has a significant probability of 0.200. Meanwhile, trading volume activity has a substantial chance of 0.000

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before the event and 0.001 after the event. Because of who normally distributed the abnormal return data, hypothesis testing was carried out using the paired sample t-test. Meanwhile, the trading volume activity data is not normally distributed, so hypothesis testing is done using the Wilcoxon Signed Rank Test.

Table 4: Comparative Test

Paired Samples Statistics for Abnormal Return

Mean N Std. Deviation Std. Error Mean Pair 1 Before .00044018 45 .012746352 .001900114 After .00640091 45 .016625572 .002478394

Paired Samples T-Test for Abnormal Return Paired Differences

t df Mean Std. Deviation

Std. Error Mean

95% Confidence Interval of the

Difference Sig. (2-

tailed)

Lower Upper

Pair 1 Before - After -.005960729 .023260679 .003467497 -.012949011 .001027552 -1.719 44 .093 The Wilcoxon Signed Rank Test for Trading Volume Activity

Sesudah - Sebelum

Z -.186 b

Asymp. Sig. (2-tailed) .852 Source: Data processed,2020

Based on the test results on the output paired sample statistics, which show that there is an increase in the average abnormal return after the event compared to before the event. This can be seen from the average value of abnormal returns before the occurrence of 0.00044018 to 0.00640091 at the time after the event. The third output is paired samples test. Based on this output, it can be seen that the results of testing the difference in the average abnormal return of LQ45 stocks. In the period before and after the announcement of implementing the new normal by President Joko Widodo, the significance value was 0.093 or more than 0.05. This means that statistically, there is no significant difference in abnormal returns before and after the announcement.

As for the testing of the trading volume of activity index LQ45, in the period before and after the events of the new performance of operations by President Joko Widodo, the z rate was - 0.186 with its significance at 0.852 or more than 0.05. This means there is no significant difference between trading volume activity before and after the new standard implementation by President Joko Widodo to the company listed on the LQ45 Index for the February - July 2020 period.

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